Five housing ministers, four chancellors of the exchequer, three prime ministers, two different monarchs and a partridge in a pear tree. Season’s greetings at the end of a very difficult year.
Fate is going to have its work cut out making 2023 any more unsettling than 2022. A year of slow resumption of humdrum normality would be most welcome, even if it leaves Property Week short of dramatic headlines.
As we discuss in our review of the past 12 months, the year got off to an optimistic start, with many in the sector predicting a bumper year. None could have foreseen what would unfold, from the barbaric invasion of Ukraine to six months of strikes on the railways.
As outlined above, the past year has seen some unusual numbers. Inflation peaking (hopefully) at 11.1% in October was among the most unwelcome figures to emerge from the Office for National Statistics (ONS) during 2022, a 40-year tide mark that has in turn pushed up the Bank of England base rate from 0.25% to 3% over the course of the year. A further rate rise was on the cards as we went to press.
And as the price of goods and the cost of borrowing have spiralled up, the value of commercial property has tumbled down. Virtually all of the big listed firms in the sector have seen their share prices drop over the course of the year, as institutional investors have cut their losses or been forced to sell to maintain liquidity, and those willing to buy the stock have priced in larger and larger discounts.
As I write, REITs have been clobbered: Shaftesbury shares are down 43% over the year to date, SEGRO is down 41% and Tritax 39%.
Shares in some, like Landsec, have recovered somewhat – down 18% year to date, having recovered from a low of -36% in October. But the price still reflects a 40% discount on net tangible assets per share reported in November.
Housebuilders have undergone similar shifts in valuation. Shares in Persimmon have shed 56% of their starting price on 4 January this year, Barratt Developments is down 47% and Taylor Wimpey has seen 42% of its market capitalisation vanish.
Berkeley Group has done comparatively well (shares down 22% year to date) but this week spelt out the headwinds it faces as it turned in half-year results with reduced revenues. The drag factors include rising taxes and levies, planning delays and new regulations on top of the difficult macroeconomic factors. Chief executive Rob Perrins set out his plan to hunker down: “[We] will focus on generating value from our existing assets with limited new investment.”
Even the snow has arrived early outside my window, to underscore the bleak midwinter.
Tidings of joy, such as they are, include ONS figures that showed consumer price inflation slowed in November, with just a 0.4% month-on-month increase, down from 0.7% for the same month last year, and thankfully much lower than the 2.0% month-on-month increase reported in October.
We can also take heart from forecasts that the recession will prove short, and that base rates are widely expected to nudge down again before next summer.
We live in hope. Happy holidays, one and all.
Property Week will be back in print after a festive break on Friday 13 January 2023. Unlucky for some.
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