Kevan Carrick shares 2023 property market forecast

Despite the challenges of 2022 and the continuing pressures from inflation, increased interest rates, fuel costs and ongoing economic uncertainty, the region’s property market has performed relatively well, Kevan Carrick, co-founder of JK Property Consultants, tells North East Times Magazine.

This is despite the lack of confidence in the economy, which has continued to decline and resulted in significant inflation, which, linked with steep borrowing costs, continues to slow spending.

The impact can be seen in decreased revenue and cashflow for many businesses as increased costs reduced profits and, in turn, saw a reluctance to invest in growth.

In some cases, businesses have found it a challenge to survive and had no choice but to reduce operations as demand in the market slowed.

High interest rates in the property market have also reduced activity for investment, and news of increasing shop closures and small businesses could well continue into the year.

However, as the economy improves, this will level off and stabilise during the latter part of 2023.

The final half of 2022 saw a major price adjustment in the market, and 2023 is set for greater activity as a whole.

The forecasted settling of the economy towards the end of the year will see a surge in opportunity and prices paid for investments will be geared more to revenue, rather than capital growth.

The development sector will continue to delay project start times.

As such, immediate future activity will be geared to more minimal risk approaches, where planning risk is lower and consent is more certain.

Development decisions will also be led by the demand for more sustainable and lower cost buildings for manufacturing, logistics and offices.

There has been an increased supply of distribution warehousing over the last couple of years but, with weaker consumer demand, this is likely to slow.

The adjustment for shorter supply chains from a ‘just-in-time’ to a ‘just-in-case’ approach by manufacturers is likely to continue.

The lower demand experienced will continue into the new year, but an improving economy toward the end of the year will support ongoing demand.

The shortage of good warehouse space will see improved returns and revenue streams.

There has been a major adjustment in the retail sector and, with many closures over the last year, this will continue in the short-term.

However, as the economy picks up towards the end of the year, there should be some improvement in shopping trends for basics, but with the larger purchases still lagging.

The trend of lower occupancy rates for offices will continue as more businesses join the conscious movement towards green buildings to meet lower occupancy costs and become more sustainable.

This will further support demand for offices under construction with higher environmental standards, leaving the older more ‘brown’ buildings to struggle and suffer from discounting in rents and prices.

A similar position will emerge as manufacturing begins to invest to improve productivity.

The higher cost of mortgages has impacted on demand, and is working through to residential development.

This will continue throughout the year into 2024, and will not change until interest rates begin to fall.

House prices are likely to remain resilient as overall demand, while decreased, will hold steady.

 

 

However, there will be price falls and repossessions will be more prevalent in the lower end of the market.

New development will continue to be constrained by the supply of land, planning risks, rising land prices, shortage of labour and materials, working through to higher inflation in build costs.

The construction sector is poised for greater innovation and investment over the next few years to reduce expenditure and speed up construction timeframes.

A key component of this will be quality and sustainability, which will be an increasingly important factor in reducing occupational costs and meeting increasing demand from Government to reach net-zero carbon targets.

A better position is anticipated in the commercial sector, where demand is accelerating beyond Government sustainability targets from both ends.