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CBRE: Spotlight on London


One of the world's most famous capitals and a city that has fascinated for countless centuries, London still maintains its status as one of the globe's most importance centres of activity.

Looking individually at the property sector, London has proven to be a vital hub both within the UK and globally. So how is this city faring currently, and what is in store for the future?

Global real estate firm CBRE conducts regular research and analysis on the city, and at the end of October, released two further reports on property in London. Covering the topics of London's performance relative to a global scale and the progress of its regional land development, the reports make for insightful reading for property investors and developers focusing on the city.

Here are the main findings and takeaways from the studies.

How is London property performing internationally?

The first of the reports - 'Global living: London in an international context' - looks at London's residential property market and compares it to major cities across the globe, such as Hong Kong, New York and Tokyo. In conducting the analysis, it takes it account a variety of factors including the wider economic context, overseas buyer activity and regulatory impacts such as those surrounding tax.

One of the main points from the report is that London is leading in terms of prime residential prices. According to CBRE, prime residential prices in London grew by 16 per cent last year to hit £2,000 per square foot (psf). This has allowed the city to edge other markets such as Hong Kong (£1,950), New York (£1,800) and Sydney (£1,200).

CBRE points to a quick rebound in demand for London prime property following the global financial crisis as a key driver of the city's performance. In fact, it has found that price growth in London has increased by an average of around 9 per cent per annum over the last five years.

However, while London trumps its major competitors in terms of prime residential property, the report found that it lags in several other key measures. For instance, prime retail rents in London average £828 psq, placing it fourth on the list. By comparison, rents in the top-ranking city, Hong Kong, are more than triple that: £2,565.

London fared slightly better for prime office rents, although it still fell in second place behind the leader, Hong Kong. The average office rent in central London was revealed to be £109 psq, just short of Hong Kong's £131 psq.

How far can travel times affect house prices?

CBRE's other London report from October, 'Regional development land: A return to sustainable growth', took a national-level view and assessed the performance of the city's key regional land markets. It also looked at the correlation between distance from central London and house prices.

According to the report, the time it takes to commute to the centre of the city can has a substantial effect on residential prices. CBRE's analysis shows that property prices can be up to a third cheaper in areas that are within a 30 to 35 minute train commute from central London.

Such is the impact that commuting distance has on property price, that CBRE estimates an increase of a single minute of travel time from central London can drive up a house's value by a whopping £11,400.

With the average house price in central London currently at £892,000, this has substantial implications for investors looking at property both within the heart of London and its surroundings.

Date Published: 13 Nov 2014
Category: News

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