Our regular Bristol and UK property reports are written by economist Chris Worthington, who is a regular speaker at our PIMs.
Property market booms
In recent weeks the property press has been full of news about the booming housing market that refuses to slow down, despite the impact of COVID – 19 and the forecast of a severe economic recession.
The stamp duty holiday up to 31st March 2021 on properties worth up to £500,000, announced by the chancellor, has boosted the market and The Times reported that the Rightmove House Price Index was 2.4% higher than before the lockdown in March.
The latest residential market survey from the Royal Institution of Chartered Surveyors (RICS) also found that the market was benefitting from the release of pent up demand and the stamp duty holiday.
However Simon Rubinsohn, chief economist at RICS commented “there remains rather more caution about the medium term outlook with the macro environment, job losses and the ending or tapering of government support measures expected to take their toll.”
The government is bringing forward proposals to reform the planning system with the aims of increasing the number of homes built each year and helping to revitalise town centres.
The measures include extending the permitted development rights that already allow for the conversion of offices to homes to the conversion of vacant shops and commercial buildings.
Developers will also be allowed to demolish vacant shops and build homes in their place.
Commercial redevelopment opportunities
Britain’s high street certainly need a boost in the wake of COVID – 19 and internet shopping and if conversions of office, retail and commercial buildings are done to a high standard it could make substantial contribution to the regeneration of the high street.
However the relaxation of permitted development for shops is an opportunity for buy to let (BTL) investors to get involved with conversions from retail to residential possibly in a joint venture with a developer. The cost of conversion could be relatively low because the main fabric of the building would be retained.
Investing in a shop to residential conversion is outside the scope of a traditional BTL investment – so what is the risk/reward profile?
Permitted development is a major incentive as it removes the risk and expense associated with a planning application.
An empty shop premises could probably be bought cheaply, although the valuation could be problematic. The renovation of the property will create an increase in the value of the property if is sold at a later date. A property in a town centre could attract a premium rent and this could be enhanced by renting it as a live/work unit.
Before considering an investment in a retail to residential conversion BTL investors should carefully research the high street location.
- Is there a good mix of speciality shops, cafes and restaurants?
- Is there a business improvement district in place, how is it funded and what is the work programme?
- Are there larger anchor shops nearby and are they busy and doing well?
Finally at the risk of stating the obvious, talk to other local landlords and commercial estate agents.
Our Next Property Meeting
We will all be discussing the latest position on the property market in Bristol and across the UK in the light of Covid-19 at our next PIM.
We’ll be arranging this when it is safe and practical to do so.
Meanwhile, stay safe.