Europe

UK property values forecast to fall by 5% next year

Correction in prices is rational due to a higher risk environment

UK commercial property values could fall by an average of 4.9% next year and by up to 14.5% in the London office market, according to post-referendum forecasts from Real Estate Strategies.

According to director Malcolm Frodsham, a correction in prices is rational due to a higher risk environment with a wider range of possible outcomes.

“Investors should rightly demand a higher return for taking such risks,” he said.

“London would be expected to suffer a more pronounced increase in the risk premium, therefore the steepest fall.”

Frodsham, a former head of research at IPD, said he expected a very active property market, with high rather than depressed levels of investment turnover.

“We anticipate that these risks will be too much for more risk-averse investors who will put stock onto the market,” he said.

“While the short-term outcome of the referendum is adverse, real estate is likely to be better value for investors at some point in the coming months or years than it was before the referendum.

“The question, of course, is: when?”

Property value forecasts

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