Institutional investors hot for London property market - IFN

Institutional investors hot for London property market

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UK: Property consultancy Jones Lang LaSalle predicts more than GBP2.85 billion (US$4.33 billion) in the private rental sector in the UK is currently being eyed by domestic and overseas funds. This demand is expected to continue as the housing market improves in the UK, backed by government efforts and homebuilders. According to real estate punters, returns from the residential rental property market, particularly in London and south England, will continue to be attractive as demand grows and will carry on outpacing the commercial real estate sector. Last year, data from M&G Real Estate in the UK showed that the residential property market charted an annual total return of 9.7%, compared to 5% in the commercial property market. Institutional investors who are touted to be sizing up the prospects of the UK’s housing rental market include major insurance players, Aviva, and Schroders. In an interview with a Gulf daily, James Mannix, head of residential capital markets at property surveying firm Knight Frank said: “The UK institutions are struggling to get the returns they need from the bond market. They have a huge amount of money to invest somewhere and the residential market is massive. The income is also very secure although it does not have long leases or tenants with covenants.” London Central Portfolio, which launched the UK’s first Shariah compliant residential property fund in 2011, is also of the opinion that the UK property market is looking up. In its latest analysis, it said that an increasing availability of credit, marginal rises in employment and the government’s help-to-buy scheme have bumped up growth in property transactions and prices. It said: “Whilst overall transactions in prime central London saw a slight rise of 3%, property prices grew 10% over the month. The average has now breached the GBP1.5 million (US$2.28 million) barrier for the first time to stand at a new high of GBP1.51 million (US$2.29 million). These figures should be treated with caution, however. The performance has been buoyed by an increased number of high value sales above GBP5 million (US$7.6 million). In this price segment, transactions rose from 15-27, representing an 80% increase over May 2012."