London's Real Estate/ Property Industry
- greaterlondon
- Apr 18, 2015
- 3 min read
The city of London is one of the largest, most influential financial centres in the world. Together with New York and Tokyo, London controls much of the global economy. As the capital of England and the financial and legislative capital of the UK, the city towers over other cities in the UK and Europe. In fact, London's GDP alone is more than most small countries.
The development of the Property industry in London can be attributed to the city's history. London has developed from the middle ages, from a trading hub to an international centre for trade and commerce. This has seen developments in the two principal segments of the property market: the commercial segment and the residential segment.
In the commercial property segment, London has a wide variety of property options for enterprises looking to buy, rent or lease premises for their business. The segment is divided into industrial, office and retail properties. While Central London may be synonymous for its retail properties, there are also a plethora of office properties available. The most obvious example is the Canary Warf area that houses some of the major powerhouses in the capital markets.
As of 2010, the office segment of commercial property in the whole of the UK was valued at £170 billion, 58% of which can be attributed to Central London. While the city contributed to a fifth of the entire UK commercial market segment's value (£488 billion), it is clear that London is a significant market for office space. Despite the fact that the price of prime properties in Central London in the past year has gone up by 11.6%, according to Knight Frank, the volume of units sold has gone up almost 85% over the same period.
The market is still only just recovering from the lows following the 2009 credit crisis. On top of this, the economy of Europe is currently experiencing dire constrains. According to the Property Data Report prepared by the British Property Foundation, UK commercial property was highest earning asset class, ahead of equities, in 2010. With that in mind, it is palatable to comprehend the investment in the commercial property segment in London.
Residential property is the largest segment in the property market. Unlike the rest of the UK, London residential property prices have been rising steadily. The Land Registry records that prices in some London neighbourhoods have gone up 9% year-on-year. These areas include Knightsbridge, Kensington, Mayfair and Chelsea. In these places, demand is being driven by the £1 million to £2 million market. Nevertheless, the average price for a home is still under £1 million. Analysts at Chesterton Humberts, estate agents that deal with high-end properties, believe that this is being driven by demand from abroad. In a bid to look for a haven from the Euro crisis, investors from the greater European region are turning to the London property market to invest their money. A favourable legal climate in the UK allows investors to transact in property with minimal transaction costs and tax requirements. It is also notable that although about 60% of commercial property is being rented; only a third of residential properties are rented.
Apart from the main segment in the property market, there are other niche segments. These include healthcare, student accommodation and leisure. For instance, London has a number of enormous football stadiums like the Emirates stadium in North London and the Wembley Stadium. Leisure properties include the London Eye, situated next to Waterloo, and the O2 Arena. The property market in London is extremely important, not only to the economic wellbeing of the city, but to the social wellbeing of its citizens. The industry provides job opportunities for thousands of workers, from construction of new residential and office blocks to property agents, managers and traders.
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