London property prices are 'exceptionally expensive'

Thursday, 20 March 2008 10:30 AM

Research from the Urban Land Institute (ULI) has found the rocketing property prices in London are proving detrimental to the city's popularity with investors.

According to the organisation - which focuses on the use of urban land in order to enhance the total environment - London has fallen to fifteenth place in terms of investment prospects and thirteenth place with regard to development prospects.

This was despite the English capital being "a long-term favourite" in the recent past.

"It is a measure of the sentiment of investors and developers which I think reflects that London, relative to other markets in Europe, has become exceptionally expensive," explained William Kistler, president of the ULI for Europe.

"It is three times 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, frankly, was unsustainable."

Research from international estate agent Knight Frank finds property prices in London were increasing at a rate of over 30 per cent annually during 2007.

"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," continued Mr Kistler.

Traditionally Paris has been overly dependent on the financial services sector but in recent times has diversified its activities, something the ULI believes London has not been able to do.

"A combination of high prices for London and concerns about falling demand because of the credit crisis are the primary reasons," continued Mr Kistler.

Furthermore, this slow down in interest could also prove detrimental to the UK property market as a whole.

"I think that property overall is an important part of the economy because it generates jobs, construction and services among a number of other things. There is still a fair amount of uncertainty about how long this will last and if projects and major projects in the pipeline will be put on hold," continued Mr Kistler.

"So far that hasn't happened [but] if it does, I think we will see a more significant impact on jobs, certainly in construction and the ancillary services around construction."

Tags:
• uk property news