Foreign investors have pulled away from the U.K. commercial real estate market, the prevalence of low oil prices and unstable stock markets keep investors alarmed, as per a study of property agents.
The demand for U.K. commercial real estate from overseas investors went into a slump in the previous three months of 2015 for two consecutive quarters, as indicated by the Royal Institute of Chartered Surveyors. The decline comes as general buyer interest for U.K. estate markets reached its slowest pace in over two years.
Prices of U.K. business properties, like workplaces, shops and warehouse centers-are comprehensively anticipated that would continue ascending because of high demand for only a few number of assets, according to RICS.
Solid demand for commercial properties has pushed up costs in urban areas in a global scale. After the 2008 financial crisis, investors and investment firms consequently considered real estate property to be a gray area for financial stability, while returns looked better compared to bonds and other assets. Investors begin to become more cautious with their real estate property investments.
London, which has pulled in major foreign investors from Asia and the Middle East, has been the center of focus. A year ago, $40.5 billion of commercial real estate were made in London, over 50% of the U.K. total of $72.7 billion, presented by Real Capital Analytics.
RICS chief economist Simon Rubinsohn says, "For the time being, the real estate sector seems largely insulated from the turmoil affecting financial markets."
Despite the decreased number of foreign buyers, strong investor demand, limited supply, and a developing economy will keep on underpinning commercial property values.
The low loan cost environment gives comfort to those areas of the property market where values look stretched and ostensibly more powerless against a material shift in monetary policy.
Markets expect the Bank of England to keep its base rate at 0.5% until no less later 2017.
