How The UK Real Estate Market Is Likely To Perform In 2020?

  • Jan 13, 2020 GMT
  • Team Kalkine
How The UK Real Estate Market Is Likely To Perform In 2020?
How did Real Estate perform in the year gone by?

The UK Real Estate market had a decent year in 2019, with average overall returns in production, but at an extremely slow pace. In the years since the Brexit referendum was conducted, Britain’s exit from the European Union remained a key driver in terms of shaping the investors’ and buyers’ decision around putting money in the sector, some macroeconomic factors, such as inflation, interest rates, and overall growth forecasts also played an enormous role.

On an average, UK Housing prices remained largely flat, with a 0.2 per cent month on month growth reported in October, while this growth was 0.4 per cent year on year as compared to the prices in October 2018. This was primarily driven by a modest price rise in Scotland Wales, while the major metropolitan areas, such as London saw housing prices go down. The activity in the third quarter of the year was affected by the previously set Brexit deadline of 31st October 2019 by the newly elected Prime Minister Mr Boris Johnson.

Following mostly stagnant three quarters in terms of housing prices, the months of November and December saw a robust growth of to post an approximately 1.4 per cent year on year growth at the end of December 2019. Analysts and experts saw this as a recovery sign of the housing market, after a year full of uncertainty. The experts believe that this correction in house prices will continue in 2020 if there is some certainty around Brexit is achieved, while interest rates and inflation are also expected to play a key role in the industry.

An outlook for UK Real Estate Sector in 2020

The end of the previous year was a somewhat promising for the UK real estate space, but the continuous downfall of the retail sector in the country is also expected to lead to another slowdown in the Real Estate market, at least in the beginning of the year. Number of companies have either closed down, are being put under administration, or closing down a number of their stores, which affecting the retail and high street real estate landscape significantly. Albeit these challenges, Real Estate will continue to be an attractive asset in 2020, as far as experts are concerned. This is primarily due to the boom in the demand for flexible as well as regular office spaces. The primary reason behind this is the growth in the flexible office space providers, as well as the availability of the opportunity with only 2 per cent of all office stock being occupied by Flexible Office space currently.

Another factor will be the investment, expected to be attracted by the sector. Following the year-end boom in returns in the sector, and a low-interest rate in the economic environment, this sector presents a unique opportunity to investors as an alternative to Fixed income funds. This is also a consideration due to the ability of these real estate assets to provide stable income to the investors through rent and lease payments which makes this asset class extremely effective for the investors in 2020.

More and more investors are also moving towards developing local and sub-urban real estate infrastructure, as the metropolitan real estate, such as in London (one of the most expensive cities in the world) continues to be expensive, and it also does not appear to be a growth market in the coming future. Another factor in 2020, real estate development will be the move towards these regional areas, as in fact these areas present a unique mix of both Industrial as well as corporate occupation, which allows a good mix of diversification for investors.

Real Estate continues to be a challenging area as on whole, but all factors considered, 2020 could be a good year for the sector and can be a driver of growth for the United Kingdom’s economy. This will also provide opportunities for investors to invest in the UK Real Estate equities. We would be discussing two key stocks, with solid performance and sound potential in the sector.

British Land Company Plc

British Land Company Plc (LON: BLND) is the United Kingdom based Real Estate Investment Trust (REIT) that primarily focuses on development and financing of retail real estate portfolios.

BLND Stock Price Performance BLND Stock Price Performance

(Source: Thomson Reuters) Daily Chart as on 13-January-20, prior to the closing of the London Stock Exchange

As on 13th January 2020, at 01:30 P.M Greenwich Mean Time, by the time of writing, British Land Company Plc’s share price was reported to be trading at GBX 591.60 per share on the LSE, an increase in the value of 1.09 per cent or GBX 6.40 per share, in comparison to the previous day’s closing price, which was reported at GBX 585.20 per share. While writing, the share of British Land Company Plc has been trading 27.14 per cent over the 52-week low share price, that was reportedly GBX 465.30 per share and was reached on August 15, 2019. While writing, the share price has been reported to be 8.87 per cent below the 52-week high price of GBX 649.20, that the company was reported to be trading on October 22, 2019. The company’s market capitalisation stood at a value of GBP 5.422 billion with regards to the current share price.

The company’s stock has shown a positive change of approximately 8.48 per cent, in the previous twelve months, from the price of GBX 545.34 that the stock hit on January 14, 2019. The British Land Company Plc share has also displayed an upward change in the last six months of the year, of around 9.88 per cent from the share price of GBX 538.40 that the company’s share set on July 12, 2019. The company’s stock depicted a negative change of around 4.92 per cent, within the previous month from the stock price of GBX 622.20 per share that the stock hit when the markets closed on December 13, 2019.

The beta of the share of the company has been reported to be at 0.88. From this, we can infer that the movement in the value of British Land Company Plc share, is less volatile as against the movement of the benchmark index in the last twelve months.

 Land Securities Group Plc

Land Securities Group Plc (LON: LAND) is a real estate organisation based out of United Kingdom. Its area of operations is divided into two categories, Retail portfolio and the London Portfolio. The company makes investment in real estate sector which includes shopping centres, shops and offices.

LAND Stock Price Performance

(Source: Thomson Reuters) Daily Chart as on 13-January-20, prior to the closing of the London Stock Exchange

As on 13th January 2020, at 01:40 P.M Greenwich Mean Time, by the time of writing, Land Securities Group Plc’s share price was reported to be trading at GBX 959.80 per share on the LSE, an increase in the value of 0.31 per cent or GBX 3.00 per share, in comparison to the previous day’s closing price, which was reported at GBX 956.80 per share. While writing, the share of Land Securities Group Plc has been trading 31.16 per cent over the 52-week low share price, that was reportedly GBX 731.80 per share and was reached on August 15, 2019. While writing, the share price has been reported to be 5.86 per cent below the 52-week high price of GBX 1019.50, that the company was reported to be trading on December 13, 2019. The company’s market capitalisation stood at a value of GBP 7.094 billion with regards to the current share price.

The company’s stock has shown a positive change of approximately 13.67 per cent, in the previous twelve months, from the price of GBX 844.40 that the stock hit on January 14, 2019. The Land Securities Group Plc share has also displayed an upward change in the last six months of the year, of around 14.56 per cent from the share price of GBX 837.80 that the Land Securities Group Plc’s share set on July 12, 2019. The company’s stock depicted a negative change of around 4.16 per cent, within the previous month from the stock price of GBX 1001.50 per share that the stock hit when the markets closed on December 13, 2019.

The beta of the share of the company has been reported to be at 0.96. From this, we can infer that the movement in the value of Land Securities Group Plc share, is slightly less volatile as against the movement of the benchmark index in the last twelve months.

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