Foreign investors keen on stable UK property market, say analysts

Central London continues to be the focus of investment with foreigners dominating the market, says Colliers International in its latest property snapshot. It believes that generally June activity will be limited to deals agreed in May and secondary asset sales are stalled by an imbalance between buyer and seller expectations. In the residential sector the housing market remains stable, but it is vulnerable to any increase in mortgage costs. Foreign demand for London prime property appears to be unaffected by March’s budget. In the commercial market retail sales continue struggling to overcome bad weather and poor sentiment. A sales rebound may come as the Jubilee celebrations, the European Football Championships and the Olympics beginning to have an impact, the report says. Office markets are seeing some movement and there are numerous large leasing requirements, but completions are not expected until the second half of the year when further rental growth is expected. As far as the industrial sector is concerned retailers are looking again at supply chain facilities, especially dot.com operators who want to expand market share. However, the multi let market remains quiet, buffeted by Eurozone uncertainty. ‘GDP growth in the first quarter of 2012 was revised from -0.2% to -0.3% quarter on quarter. Capital formation, net exports and inventories fell while household and government spending rose by 0.2% and 1.6% quarter on quarter,’ said Walter Boettcher, director of research and forecasting at Colliers International. ‘Encouragingly, business investment was up by 3.6% quarter on quarter. Service sector activity suggests a better second quarter result. OECD Composite Indicators also suggest a positive turn for the UK economy,’ he explained. ‘The UK economy is stable, but not improving, and is vulnerable to shocks. Real wages are contracting and not supporting household spending. Falling inflation is providing scope for further policy stimulus, improved sentiment and is likely to result in a stronger year end both for the UK economy, but also for UK property,’ he added.