Practice Briefing Market indications and property returns in the UK

Abstract

PurposeThe intent of this Practice Briefing is to provide clarity on drivers of property pricing in a changing economic environment. The principal basis of this analysis is to investigate how properties have been priced relative to interest rates over the long haul. Such an insight may help investors navigate the world of property investment in a post zero interest-rate policy (ZIRP) world.Design/methodology/approachThis practice briefing is an overview of the role of economic drivers in pricing property in different economic eras pre- and post-ZIRP. It looks at returns over time relative to risk criteria and growth.FindingsThis briefing is a review of property pricing and its relationship to economic drivers and discusses the concept of return premiums as a market indicator to spot under/over-priced property assets in the market.Practical implicationsThis briefing considers the implications of identifying salient and pertinent market indicators over time as bellweathers for property pricing. Good property investment is grounded in understanding when assets are under and overpriced relative to investors’ expectations of growth and returns going forward. An understanding of markets and the current indicators thereof can provide investors with insights into those criteria.Originality/valueThis provides guidance on how to interpret markets and get an understanding of property pricing over time.