Example Hero

Research article

Chestertons Monthly Property Markets Review October 2014

Monthly_Research

Overseas investors are now the largest owners of UK commercial property.

David Ramsdale, Research Analyst

Report Highlights

  • For the first time overseas investors have surpassed UK institutions as the largest owners of UK commercial property.
  • Buy-to-let lending has surged throughout this year but struggled in August along with the rest of the mortgage market.
  • The office market in London is becoming increasingly competitive as supply levels have dropped to record lows.
  • House prices in London jumped 2.7% from July and 21.7% in the year to August to an average of £467,070.

House prices in London jumped 2.7% from July and 21.7% in the year to August to an average of £467,070, Land Registry data shows. Merton (3.4%) and Richmond (3.0%) enjoyed the strongest monthly increase while Lambeth (28.9%) and Lewisham (28.3%) recorded exceptional annual growth. Since the previous peak in the market before the recession prices in London have more than recovered and the London average house price is now a third higher than in February 2008. At a borough level it is no surprise that prime boroughs have fared best. Kensington & Chelsea has outperformed every other London borough with house prices 65.0% above the last peak,
followed by Westminster, Hammersmith & Fulham and Camden all above 50.0%. The worst performing borough since the top of the market is Barking & Dagenham where house prices are just 1.0% above the previous high.

Further interventions by the Bank of England’s Financial Policy Committee (FPC) are expected in the near future despite the market cooling off in recent months. A survey compiled by the Intermediary Mortgage Lenders Association (IMLA) comes in line with the interest rate stress test against a 3% base rate increase for borrowers, and a 15% cap for lenders on the number of new loans above 4.5 times loan to income, that have taken effect from this month. Both lenders and brokers believe that the 3% stress test will have more of an impact on the market rather than the loan to income cap.

For the first time overseas investors have surpassed UK institutions as the largest owners of UK commercial property. The value of portfolios held by owners from overseas has more than doubled in the last 10 years to £94 billion, the Property Industry Alliance has found. Foreign investors now own 24% of all commercial property in the UK, with three quarters of this located in London. Conversely UK institutions ownership of commercial property has fallen by 16% in the last decade to represent just over a fifth of the market at a value of £75 billion.

Preliminary estimates from the ONS reveal a slowdown in economic growth in Q3 as GDP increased by 0.7% in the three months to September, down from 0.9% in Q2. All four main groupings recorded growth in the third quarter of this year with the construction sector seeing a 0.8% improvement, 0.7% in the services sector, 0.5% in production and 0.3% in agriculture. GDP is now 3.0% higher than at the same stage last year and 3.4% higher than the peak of Q1 2008.

Oxford Street Article Details

Contributed by

David writes reports on the London, UK and international property markets.

Research David Ramsdale

David Ramsdale

St Magnus House

020 3040 8405