Shocks, surprises and. of unusual uncertainty ERCIAL, ECONOMY, BR. allsop.co.uk. Shocks, surprises and opportunities in a time of unusual uncertainty

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1 ROPERTY, RESIDENTIAL OMMERCIAL, ECONOMY Shocks, surprises and ROPERTY, opportunities RESIDENTIAL in a time OMMERCIAL, of unusual uncertainty ECONOMY ROPERTY, RESIDENTIAL OMMERCIAL, ECONOMY ROPERTY, RESIDENTIAL allsop.co.uk ERCIAL, ECONOMY, BR

2 The Economist s View David Smith, Economics Editor at The Sunday Times We are living through a period in which impossible or at least highly unlikely things have been happening. What we know in 08 Lorem iposm When Lewis Carroll said of Alice in Wonderland that she could believe six impossible things before breakfast, he could have been thinking of the current era. So the global financial crisis of 007-9, itself a black swan event, was followed by many more. Think of the eurozone almost being brought down by Greece, its smallest member, or official interest rates being close to zero for close to a decade. Anybody putting money on Britain voting to leave the EU a few years ago would have got very good ispom odds. Or how about Donald Trump being elected president lorem (and still being president now), or Jeremy Corbyn becoming Labour leader, and promising a hard-left agenda in government? All these were, in their way, shocks and surprises, creating challenges as well as opportunities. The good news is that we have learned that the world does not end when unexpected things happen. The even better news is that if we look at the world economy and what happens in the world matters a lot to an open economy such as Britain you could be forgiven for thinking that all the surprises we have had have been positive ones. The world economy is enjoying its best period since the crisis, and is firing on all cylinders. Trump was supposed to pose a danger to the US economy and therefore to the world but it is hard to believe that things would be better if Hillary Clinton had won in November 06. Indeed, given the impetus supplied by Trump s tax cuts, it would almost certainly be doing worse. The European economy, which was expected to suffer as a result of Brexit and last year s flurry of elections, is doing better than for many years. For Britain, this means that while growth has weakened a little as a result of Brexit uncertainty and the squeeze on take-home pay from higher inflation, it has not weakened a lot. And, while the uncertainty has further to run, a strong global economy should limit any downside for the UK economy. In that context, what can we expect? It is fair, I think, to expect further increases in interest rates. The Bank of England, having broken a 0-year duck on hiking rates last November, is likely to continue the process, but it will do so very gradually. The debate in the markets is whether we will see one or two rate hikes this year, on the road to a new normal for Bank rate to % to.%. Once that point is reached we will see the Bank start to reverse another of those impossible things, the bn of quantitative easing, or money-printing, it has undertaken since the crisis. On Brexit, the most likely outcome remains that Britain and the EU will strike an outline deal this year, with the details to be worked out during what could be a long transition period. That will mean, for most businesses, nothing much changes in the short-term and that it will be fine to carry on as before. The government s aim is the minimum of disruption and if it succeeds business will breathe a sigh of relief. There is, of course, another possibility, and it is one that keeps many people, including me, awake at night. This is that divisions in the Tory party come to a head, Theresa May is forced to step aside, and a Corbyn-led Labour party takes advantage of the ensuing wreckage and comes to power. A hard-left Labour government promising to tax the better-off and business and to push through a programme of nationalisation, would be bad at any time. Combine it with Brexit and it would be a disaster. We have to hope that this is one impossible thing that does not happen.

3 The Residential Auctioneer s View Gary Murphy, Partner at Allsop Things to watch out for in 08 Residential A buying opportunity in London This year will see correction as different sectors of the market and regions of the country come to terms with tougher taxation and mortgage regulation, rising interest rates and political instability. Watch out for the opportunities that these conditions will present. Cash will be King. Improved demand in the home counties and the suburbs Although London prices on average will remain static, watch out for the Home Counties and the suburbs. It s in these areas that London buyers will be likely to search for more living space for their money. Buying for growth regional cities Keep an eye on the regional cities for good quality new build stock in areas of strong tenant demand. Many are showing attractive yields and rewarding capital growth. Do your research though some locations may be at risk of oversupply. A note of caution ground rents If you re a ground rent investor, be aware of important potential reforms to the leasehold system. Things to watch include proposals for nil rents on new homes leases and a growing pressure to reduce enfranchisement pricing. Land for residential development The Government is very keen to see suitable land developed to provide housing and to meet its target of 00,000 new homes a year. This should encourage the sale of land to release value, particularly in areas of greater housing need and more limited affordability. Smaller scale residential development opportunities, with and without planning permission, are likely to feature in the auction rooms this year. Whether you re thinking of buying or selling at auction, you can find our auction dates online at or for more information speak to a member of the auction team.

4 The Commercial Auctioneer s View George Walker, Partner at Allsop Buying for growth retail rental growth is emerging DIY growth look out for RPI reviews 6 There is some evidence of rental growth on the High Street. Whilst still a rarity, where lettings were done in the lean years after the highs of the noughties, those rents and indeed reviews may have been soft and some rents have improved. Research and local knowledge can therefore pay dividends. Growth is clearly built in where there are RPI review clauses and with inflation nudging % pa this could deliver around % over a year period. What s popular? Buyers are still happy with the retail sector, but very much aware of the more online-resilient sub sectors which cannot be replicated online such as coffee shops, charity shops and quasi medical such as Dentists, Doctors and Funeral Directors. These sub sectors always have a strong following and seem to generate premium pricing in the room. A note of caution EPCs are not that consistent! MEES, or Minimum Energy Efficiency Standards which outlaw the letting of an F or G rated building from April 08. Property owners and potential investors need to be aware of the basic tenets of this legislation. Whilst the EPC certificate lasts for 0 years, it is rarely updated when improvements are made so a fresh EPC may show a dramatic improvement. This has implications for valuations and of course opportunities for the savvy investor. Don t be shy on lot size! With two lots sold for over 7m last year, we sold 8 lots over m. Buyers tell us that they welcome the opportunity to bid openly in a clear timeframe for larger well let or value add opportunities. The demand is there, from cash resources for lots up to 0m so it s worth considering carefully. Whether you re thinking of buying or selling at auction, you can find our auction dates online at or for more information speak to a member of the auction team. Things to watch out for in 08 Commercial 7

5 Allsop sold.bn at auction in 07 Allsop run six Commercial and seven Residential auctions a year, selling,00 lots We have a global reach to a database of 0,000 active subscribers Flexible alternative marketing methods range from a unique hybrid private treaty to auction model to a global bidding platform for off-plan new homes sales Head office West End Tel: + (0) Leeds office Tel: + (0) City office Brighton office Tel: + (0)0 788 Tel: + (0)7 000 allsop.co.uk 8