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Higher demand for good quality secondary properties in UK, says DTZ

LONDON: There is a greater demand for good quality secondary properties with active management potential in the UK by property companies and opportunity funds as banks gradually unload lower graded stock onto the market, said global real estate consultancy DTZ.

"This increase in demand is partly a reaction to the broader range of product now being offered to the market at acceptable prices. In part this is because banks have now had the time to get a better understanding of how to reduce their loans books," it said in its UK Update December 2010 dated Dec 30, 2010.

Banks are releasing the properties back to the market before unexpired lease terms become too short, due to major holding expenses and limited upside in capital values, it said.

The report said while assumptions on the performance of the secondary market are still conservative, demand has been stimulated by higher visibility of economic and occupier market risks.

In addition, there are also reports suggesting that there is a "more realistic view" on what prices vendors are willing to accept.

"However, the market for truly secondary product is still not really functioning," it noted.

Meanwhile, annual all property yields are predicted to fall to 5% this year from 13.8% a year ago while capital values are expected to fall on expected continued softening of secondary property prices, it said.
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