London property prices continue to soar

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by Kay Murchie

A survey has found that London is becoming unpopular with investors due to rocketing house prices.

Estate agent Knight Frank recently said house prices in the capital were rising at a rate of more than 30% annually during 2007.

The Urban Land Institute (ULI), which concentrates on the use of urban land in order to enhance the total environment, has established that London has dropped to fifteenth place with regard to investment prospects and thirteenth place in terms of development prospects.

In the past, London has been branded ‘a long-term favourite’. According to a spokesperson for the organisation, it is a measure of the sentiment of investors and developers which reflects that London, relative to other markets in Europe, has become exceptionally expensive.

William Kistler of the ULI said London is treble other European capitals, both to acquire assets as well as the rental costs that underlie those prices. The differential means that London had appreciated to a point that was unsustainable.

Mr Kistler added you couldn’t continue to grow rental income or the price being paid for buildings. So, there is that factor, but there is also a more fundamental factor which is the concerns about London’s dependency on the financial services sector relative to other European markets.

A combination of high prices for London and concerns about falling demand because of the credit crisis are the primary reasons that London is waning in the popularity stakes.

The ULI believes the slowdown in interest could prove detrimental to the UK property market as a whole.