Is London falling out of favour with property investors?
22 February 2016 by Lucinda Stacey
Is it any surprise that London is the second most expensive city to rent property in? The majesty of the city comes with a high price tag but I think this is part of its charm. Is it a surprise however, that London is no longer in the top ten of European cities with the best investment prospects? Sitting at position fifteen, London is outranked by Istanbul, Barcelona, Birmingham, Dublin and Berlin, just to name a few.
For the first time since 2012, London has slipped from the limelight in a report carried out by Price Waterhouse Cooper and the Urban Land Institute. The report collated interviews with more than 500 developers, investors and property managers across Europe. As part of the interview, they were asked to rate each city based on investment prospects, and for their impressions on the future of the property market.
It has been suggested that investors are ready to call the market as prices may have finally reached their peak; some investors suggested that yield compression in the UK capital is either at an end or likely to tail off in 2016. The director of Real Estate at Price Waterhouse Cooper, Gareth Lewis, commented that “Money tends to plough into it during the harder times, as people are looking for a safe bet, somewhere to keep their money, and as prices go up and yields compress, people looking for better rewards will look to secondary cities”.
We have previously commented that many companies are looking to secure cheaper rents outside of London. Could this be the reason for Birmingham appearing in sixth place for the second year running? The report maintains that the reason for the high result is due to companies starting to move business there due to its relative cheapness in comparison to London. Examples of companies are HSBC as well as HS2.
One anonymous investor has commented that the next move in the cycle will be for everybody who has invested in property, to sell. The big spenders will take their ‘chips off the table’ and look to mainland Europe to deploy capital which will mean more property becomes available to purchase.
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