The UK property market is riding higher than ever right now, as investors flock to London in search of high yield and this week, Simon Morris explains how international interest in the capital’s property market is driving up prices across the board.
Simon Morris: Independent Advisor to UK Property Investment Funds
Simon Morris is an independent London-based property expert with a speciality in commercial, industrial and residential property. As an advisor to UK property investment funds, Simon uses his expertise to analyse the trends running through the nation’s property market, so he in turn, can advise these funds how to reap the highest returns from their investment portfolio.
It’s no secret that commercial property is an extremely robust element of any funds investment portfolio; currently commercial property is recording higher return per investment than either stocks or bonds, but will this continue as international investment pours into the UK capital?
Asset Prices Rise as Yields Drop in Battle for London Commercial Property
In the first quarter of 2014, annual investment in UK property hit £42 million; the highest level recorded since the market’s 2007 peak. London is arguably the strongest area in the current market however commercial property asset prices in the UK capital have risen 11% year-on-year, as yields have steeply dropped, according to Real Capital Analytics/Property Data.
Experts claim that this is because international buyers are flooding into the UK market. According to Cushman & Wakefield, three quarters of investment capital in the London market came from international investors, driving London’s commercial property prices higher, as Sovereign wealth funds compete with domestic investment institutions, such as pension funds and insurance companies, for a slice of the capital generated by the lucrative London commercial property sector.
The Current Climate is a Sellers’ Market
This has led industry insiders to label the current climate a ‘sellers’ market,’ as local commercial property owners stand to sell for highly lucrative profits. Generally, this indicates a climate typified by less experienced buyers and more experienced sellers, a positive sign that indicates that London commercial property has reached a certain point in its asset pricing cycle. Now experts are asking if this point is the peak, or if the market has further to go.
We turn to China, one of the largest players on the global economic stage right now, for our answer. Last year China doubled its property investment, however this still only represents 2%. This indicates that there is room for demand to grow, as China typifies the international investment climate; a growing middle class who are looking to take the savings they make in domestic environments and invest internationally.
Simon Morris on the Future of London Commercial Property
Essentially, the flow of international capital into the London property market doesn’t look set to slow down any time soon, and this suggests that as global investors flood into the UK capital, it’s commercial property sector is set to become more competitive than ever, suggesting that it may be time to diversify the commercial elements of your property investment portfolio.