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As we know, Real Estate is one of the more cyclical industries, and whilst the fundamentals were fine during 2018, sentiment turned bearish. Against that backcloth, we saw a relatively flat picture for what is a very broad asset class, but offices performed very well, the regions were strong and London city offices continued to defy Brexit.
Retail though continues to operate in a difficult market. The size of the pie is getting no bigger, as a consequence of the consumer squeeze, online sales continue to expand and we saw a spate of CVAs during 2018.
On Residential, it’s really a game of two halves, prime Central London continues to struggle and that difficult market has permeated out into Greater London and the south east, where properties are above the Help to Buy threshold.
The regions, though, have performed really strongly, both in terms of house price accretion and in housing starts and that’s underpinned by Help To Buy and better affordability.
For our part at Barclays, we teamed up with Homes England in 2018, to launch the one billion pounds Housing Delivery Fund. It’s aimed at SME developers, to expand their businesses and help solve the UK housing crisis, so we’re hoping for great things from that in the coming years.
Looking forward into 2019
In the year ahead, I think, Real Estate’s fortunes are going to be largely tied to the political landscape and the broader UK economy.
The first of the themes is the role of the public sector in the housing market. Government have been hugely supportive with Help to Buy and their encouragement for Homes England to act as a real disrupter. More recently, lifting the borrowing cap for Local Authorities and improving the rent regime for housing associations has made a real difference.
Secondly PropTech, in banking and insurance we’ve seen how FinTech acts as a real disruptor and the same is going to be true of PropTech. Whether it’s smart design and intelligent buildings that are energy efficient; whether it’s sophisticated platforms that enhance the user experience, or indeed robotics, which are becoming bigger and bigger in the fields of logistics, warehousing and in development.
And the third theme is whether we’re coming to the end of the cycle, whether that’s an economic cycle or the real estate cycle.
I don’t know the answer to that question, but what I do know is we all learned many lessons in the lead up to the last global financial crisis and as we plotted our way through it.
If there’s anything in this video that you’d like to follow up on or discuss in more detail, please reach out to me, or someone in your local Barclay’s Relationship Team.
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