Ludo Mackenzie

How the specialist finance market will fare in 2021




The team at Octopus Real Estate have shared their predictions for the market this year, which includes the sub-sectors of commercial that are expected to stay resilient, why geographical diversification will continue, and if we can expect more brokers to enter the specialist finance sector.

Ludo Mackenzie, head of commercial property at Octopus Real Estate (pictured above) 

The commercial market is made up of various sub-sectors and their behaviours are correlating less today than at any time in my 25-year career. While retail will continue to suffer a downward spiral of higher vacancy rates, falling rents and falling values, industrial will continue to benefit from strong occupational and investor demand. 

The key to this year may be the amount of dry powder waiting to buy UK real estate on the dips. We think the amount of money hovering over the market is significant, and it will focus on those sub-sectors that have proven to be resilient to recent events and are thematically well suited to the changing world around us. So, the outlook looks good for BTR residential, care homes, retirement communities, PBSA, retail warehousing, logistics and land with residential planning consent. The outlook is uncertain for offices, hotels and leisure, while retail will continue to be shunned by investors and lenders respectively.

  
D’mitri Zaprzala, head of residential at Octopus Real Estate 

While 2020 was a tough year for all of us, we saw the residential property and lending market buck expectations time and again. While there has been understandable nervousness at the beginning of this year, I believe that the market will continue to outperform expectations. Q1 will be busy as a result of upcoming stamp duty changes for both domestic and international buyers. I think that the improving economic situation, as a result of vaccinations and further government support, will help the residential market perform strongly. 

Within lending, I expect to see specialist lenders continue to increase their market share as borrowers look for more flexible and customer-centric lenders. As a result, I foresee more new brokers getting involved in the sector. 

Finally, I expect to see geographical diversification continue. This will happen in two ways: firstly, the commuter belt will increase nationally as a result of people working from city centre offices less frequently, and smaller towns and villages with reasonable connections will become more popular. Secondly, increased demand in areas outside of Greater London will rise.  

Dan Murray, head of sales at Octopus Real Estate   

While 2021 is a tricky year to predict, 2020 has shown that the residential market has a degree of resilience that few were expecting. We are, however, still waiting to see what effects the pandemic truly has had with regards to unemployment. This will, of course, influence property transaction volumes, and I would expect to see this reduce further when the stamp duty deadline passes. The big question is, when will that date be? There is a lot of talk around an extension of this date, but stamp duty is irrelevant if buyers cannot meet the affordability requirements of banks due to unemployment. 

With all that being said, I believe the housing market will stay strong. There may be a slight decrease in house values in certain areas but not a big crash as some are expecting. There will be a steady business flow for sensible lenders with a reasonable product offering, alongside a practical outlook during the recovery of the pandemic.

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