Report reveals confidence in Kent property market grows

A report from Caxtons Property Consultants has shown that confidence and performance within the Kent property market is increasing. This sentiment is echoed by the Investment Property Forum, a leading industry organisation, which is predicting a slight improvement in UK performance this year and stronger performance in 2025.

The economy is gaining strength nationally, and this is aiding most of Kent’s property and construction sectors. In March 2024, GDP grew by 0.4%, more than expected, following increases in January and February. 

Several economic indicators have improved since last year. For example, inflation was 2.3% in April 2024, the lowest in three years, down from 6.7% last September and 11% in late 2022. Interest rates remain at 5.25% and are predicted to start reducing later in the year and may reduce to 4.5% by the end of 2024. 

Mark Coxon, director of business space M25 East at Caxtons, said: “As we found last year, the industrial and distribution sector is currently the shining star of the industry in Kent, with a shortage of such property, especially sustainable, Grade A space, resulting in new projects and higher rents. Fortunately, there is plenty under construction, particularly in Maidstone and Aylesford and the Sittingbourne area.”

Rents continue to increase, and last year, Kent industrial and warehouse rental growth at 9% outstripped the South East at 6 to 8%. The county will no doubt repeat this in 2024. Aylesford and Maidstone continue to achieve the highest increase in rents over the first quarter of 2024.

 Investment yields are steady with multi-let and single-let remaining at around 5.75% net initial yield and land values which reduced by 50% last year back up to 75% of last year’s prices due to an improvement in yields, rents and build cost.

Remote working continues to be popular with many employees. Some employers are happy with home working, but many are still trying to persuade staff back to the office, for at least three days a week. 

One of the ways companies ‘persuade’ workers to return to work is by providing a quality workplace, sometimes retaining the same amount of space for fewer workers. As a result, there has not been a rush to secure smaller spaces, although some offices have been refurbished to appeal to companies seeking better quality space.

New co-working spaces, often combined with community facilities, open every year and are proving popular. Subdued demand from occupiers has, however, taken its toll on the office sector in 2023/4 and vacancy levels are high, though the office market continues to slowly improve.

Although rental growth within the office sector has generally been flat, some towns and locations are seeing an uplift, including Sevenoaks, and Crossways at Dartford where quoting rents have moved on from £26 sq ft to £30 sq ft.

 Although the ONS retail figures for the end of 2023 were rather negative, UK total retail sales increased by 0.8% over the year to March 2024. 

Another positive sign was that food price inflation is now 4%, compared to 13.6% last August. In-store grocery sales have increased recently because consumers want to save on delivery costs. 

At the peak, during Covid, online shopping was 15% of all food shopping, but this has now dropped to around 11%.

 Demand on Kent’s high street remains patchy, similar to the story of the last few years. The high street continues to evolve with some chains being replaced by independent stores. Coffee shops continue to thrive, and the takeover of vacant high street stores by personal services shops continues. 

 In terms of both rental growth and capital values in 2024 and 2025, retail warehouses are predicted to do better than standard retail, with shopping centres faring the worst of all property classes. 

 Retail investment yields range from 6% for out-of-town retail to 10% for high streets in good secondary towns. 

Turbulence in the UK housing market during 2023 and early 2024 was caused by mortgage rates, rising building costs and the end of Help to Buy affecting confidence in the market, although build costs are recently starting to settle. As a result, the future of the residential sector is the hardest to predict. 

 The squeeze on available cash and uncertainty that consumers are facing are both moderating the price potential homebuyers are willing to pay. As a result, UK house prices fell by 0.4% in April compared with March 2024. Compared with the same month last year, property prices were down 0.6%, according to Nationwide’s house price index. 

 Across the UK, Savills predict that house prices will fall by another 3% before rising by 20% between 2025 and 2028, with total growth over the five-year period estimated to be 17.9% 

 Views vary about how housebuilding will fare in 2024 but some doubt that housebuilders will see much of a revival. Nonetheless, some housebuilders are expressing a growing sense of optimism in the housing market following an 18-month decline. 

 A Labour-led rebellion prevented the government from scrapping EU-era nutrient neutrality rules, though in some locations in Kent, innovative ways to comply are being found. 

 Rents continue to rise steadily but in September 2023, the government scrapped requirements for residential landlords to meet minimum energy efficiency standards, and this may help keep rent increases down.

 Buy to Let confidence is rising again as inflation rates drop and interest rates start to stabilise leading to an increase in Buy to Let lending, as well as lending to housebuilders.

No doubt by the time the 2024 Kent Property Market Report is released in November, there will be a clearer view of the future, although a change of government will possibly make predictions harder.

You can see the latest Kent Property Market Report report here.

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