Mar 5, 2013 - PropertyGuru.com.sg
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By Shabnam Muzammil:

Returns on residential investments in London continue to surpass the inflation rate as well as returns on commercial real estate, according to the latest IPD UK Annual Residential Property Index.     

In 2012, returns on portfolios comprising private residential homes for rent stood at 8.9 percent compared to the inflation rate of 3.1 percent and the 2.7 percent return from office, retail and industrial units. 

The strong performance was driven mainly by properties in London, with outer London real estate (zones 4-6) contributing returns of nine percent, while central London and inner London (zones 2-3) provided returns of 10.1 percent and 10.7 percent respectively.

In particular, outer London’s returns of nine percent have boosted confidence in build-to-let properties, ultimately increasing the participation of larger investors including the Dutch pension fund APG and M3 Capital Partners.

Moreover, UK residential property recorded a total return of 8.9 percent for 2012, beating the 4.2 percent return for bonds (JP Morgan GBI Global, UK 7-10 Year). But it was outperformed by equities and property equities (MSCI UK) which posted strong returns of 10.2 and 30.5 percent respectively.

Stronger capital growth accounted for the bulk of returns in central London while values outside the city declined. Due to higher prices of central London properties, income returns of 2.3 percent indicated a lower yielding and more prime asset.

Although London and South East properties fuelled the overall performance, the number of investors planning to invest in build-to-let homes in inner and outer London is also on the rise. 

 

Shabnam Muzammil, Senior Journalist at PropertyGuru, wrote this story. To contact her about this or other stories email shabnam@propertyguru.com.sg

 

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