Jones Lang LaSalle – the multi-national financial and professional services company – has outlined its predictions for the global property market in 2013, suggesting it could be a transitional year for the UK in particular.
The report – entitled 2013 Property Predictions – sees positive signs of growth in the UK economy, stating that such improvements are likely to show tangible improvements to the property market by January of 2014.
Guy Grainger, UK Chief Executive at Jones Lang LaSalle, said: “There have been some brighter signs of late. The UK economy appears to be creating jobs at a much healthier rate than the GDP figures suggest and even output rebounded in 2012 Q3. This was the Olympic quarter and boosted by several one-offs, but perhaps a corner has been turned.
“The global situation still has signs of uncertainty, although an uneasy balance is being maintained in the Eurozone. Inflation rates have also fallen substantially over the last 12 months and there is an improved outlook for consumer spending.
However, Grainger warned against expecting too much from the economy is such a short time, saying: “the broad consensus is that the UK economy is going nowhere fast and that growth in 2013 will be subdued. GDP is forecast to rise to by about 1% in 2013, better than 2012, but not great by historic standards.”
Andrew Burrell, Head of UK Forecasting at Jones Lang LaSalle, believes there will be two elements at work in the improvement of the UKs property market. He said: “Firstly, a gradual improvement in consumer demand is forecast as real incomes benefit from higher employment and lower inflation, with price increases falling toward the government’s target for the first time since 2009.”
“Second, strong corporate balance sheets are expected to boost business investment as sentiment slowly rebuilds. Nonetheless with confidence still fragile, any upturn in demand is likely to be faltering, at least until later in 2013.”
The report highlights the importance of global economic inter-dependency, and its ability to act as both a help and a hindrance to countries with no geographical link. The recent aversion of the so-called ‘fiscal cliff’ in the US prevented any immediate financial crisis, however these measures are only temporary and it is feared that any further issues could result in another international economic slow-down.
Similarly in Europe, the end of 2012 saw a cooling of Eurozone tensions that have the potential to turn incendiary following relatively minor actions, such as the upcoming election in Germany. It is also feared that fiscal cutbacks could lead to un-even growth across the continent, with the potential to cause political turbulence in Spain, Greece and Ireland, as well as the marginalisation of fringe economies.
This in-equality has been illustrated in microcosm through polarised growth in the UK, with London performing significantly better than the rest of the country in terms of both property prices and job creation.
Analysts believe the capital has the impetus to pull the UK out from recession as a result of its status as a world leading financial and management service provider. However, the rest of the UK took the greatest hit during the economic troubles, stalling the recovery that Jones Lang LaSalle believe will begin to appear in 2013.
Grainger concludes that 2013 will be a year of orientation, where many crucial features will be cemented in pursuit of economic recovery but few obvious indicators will be seen. He said: “In short, the next 12 months are unlikely to bring a dramatic turnaround. But, in a year’s time, the foundations for recovery should be in place and some light will be visible at the end of the tunnel.
“For property markets the implications are clear. Demand will respond slowly to the economic thaw as occupier confidence rebuilds. Even with limited quality space in many markets, rents are unlikely to see much uplift, outside of central London office and retail. The fall in IPD capital values has slowed of late, but further outward movement in average yields is likely, at least at the start of 2013.
“Cautious global investors are likely to stick to prime buildings in liquid, international markets, implying limited interest outside of core assets in the capital. Of particular interest is whether 2013 will herald a slow return to development as supply of new grade A space falls to historic low levels across most sectors.”