It’s that time of year, when Business Link Magazine invites the region’s business leaders to offer up their predictions for the year ahead.
It has become something of a tradition, given that we’ve been doing this now for over 30 years.
Here we speak to Paul Morris, development director at St James Securities.
I always like to start a year on a positive note, and I do see light at the end of the tunnel, having worked through the challenges faced in the previous year.
We have survived another tumultuous year for the UK economy, with record inflation, multiple interest rate rises, supply chain issues, and higher construction costs presenting challenges for the construction sector. Build costs have continued to climb and values soften, which has caused viability challenges.
Looking forward, however, as we prepare for a rebound from the economic slowdown, this should begin to stabilise, which should stimulate activity across various sectors.
Lots of schemes stalled in 2023, leading to a drop in output. I expect there to be a modest growth this year, which, although not at the same levels as 2022, is nevertheless a sign of positive change and should foster increased consumer and business confidence.
Subject to no more destabilisation caused by wars, inflation will continue to drop, but whether we hit the Office for Budget Responsibility’s (OBR) prediction of 2.8% is a subject for discussion.
I believe bank interest rates will come down slightly and sooner than imagined. I think we will see a half point reduction by mid-2024. We are already seeing changes in the bond market with government stocks starting to come down.
If bank rates and interest rates continue to come down, property yields will sharpen and values will start to go up, which will begin to bridge the viability gap.
The housing shortage led to significant growth in the Build to Rent (BTR) sector in 2023, which shows no sign of slowing down in 2024. In fact, the BTR sector remains one of the few sectors that continues to go from strength to strength.
Lots of money is available to be invested in BTR schemes, but finding the right deals remains challenging. The relationship between construction costs and property values is an issue too, but I do predict we will see a pick-up in values during the year.
Here in Derby, we are currently considering additional phases of housing including more BTR as part of the £230m Becketwell development, which will meet the demand for high quality housing in the city centre.
The hotel market also remains strong, and I see the demand for new beds across the board from budget to higher end continuing to increase over the next few years.
More and more businesses are reassessing their accommodation strategies and considering a move towards flexible office space, and this is set to continue into 2024 and beyond, with hybrid working now part of the fabric of the workplace.
