Government budget changes and surgery valuation uncertainty – Considerations for GPs and investors.
The Chancellors recently announced a “mini-budget” aimed to relieve some of the pressures of the cost of living crisis by lowering income tax and helping the lower end of the housing market by raising the Stamp Duty threshold.
This caused the financial markets to react negatively, which in turn impacted the value of the pound and UK mortgage institutions removed mortgage offers and their products. Whilst the economics are complex, forecasts suggest that the Bank of England will be forced to rapidly increase interest rates and predictions indicate a decline of the housing market creating an even worse situation than the Government originally tried to rectify.
This is a fast-changing situation and in an unpreceded move, the Bank of England has recently announced their support of the Government bond market to stabilise the economy.
Like the housing market, for the last few years the primary healthcare property market has been particularly strong with high levels of demand from investors, yield compression and an increase in the number of investors in the market. Whilst the modest interest rate rises since the start of 2022 did little to dampen this demand, given the long timescales associated with property transactions the true impact of the interest rate rises on this specialist sector of the property market has yet to be fully felt and reflected by sales yields. However, there is great uncertainty surrounding the very recent economic changes and how they will affect investor demand and property values of GP surgeries and medical centres.
Our advice to GP’s and Investors ...
Whilst there is no control over UK economic forces or property market trends there are a number of ways that practices can maximise the value of their property. It goes without saying that it is important for practice managers and investors to fully understand their property debt obligations and ensure they are on the best possible rate. In addition, it is also imperative for surgery owners that current income receipts are up to date, be it from NHS rent reimbursement or additional income.
At AR we often find that sub-let elements of a surgery building are often neglected by owners and the rental income and documentation is outdated or incorrect. Furthermore, and particularly with winter approaching, it is important that building owners ensure that maintenance schedules and minor defects are dealt with to keep properties in good repair. These factors can have a real impact on a valuer’s opinion when assessing a building.
How AR can help …
Aitchison Raffety are specialist valuers for primary healthcare property and can offer valuations for a range of purposes including secured lending, partnership, accounting, or for development purposes. It is critical therefore that owners use a specialist valuer during these uncertain economic times. AR can also offer advice and support on rent reimbursement, consultancy guidance on sub-let areas and building surveying services.
Article written by Dom Rosenbaum – Associate Director at Aitchison Raffety