London

<html><body>
GUEST OBSERVER
<div class="page" title="Page 4">
<div class="layoutArea">
<div class="column">
London is one of the most diverse, globally connected, competitive, high performing cities in the world, on a wide variety of measures.
 We have combined four of the most widely quoted indicators of World City prominence. These measure global connectedness (gaWC), performance and potential (kearney), power (Mori) and global competitiveness (eIu). Together, these create the Savills World City Ranking.
London and New York stand out far ahead of other cities and illustrate how a unique combination of strengths marks them out as global powerhouses. We have dubbed London a ‘polymath city’ for being so pre-eminent in a wide range of aspects of city life.
It might be worth noting, however, that although ranking high economically, London, and indeed the rest of the world cities tend not to rate so high on the ‘softer’ social and environmental issues.
It is also notable that none of the 20 cities rate in the top ten of the Economist’s ‘Liveability Ranking’, for example. Numbeo’s Quality of Life Index 2015 places London in 90th place out of 150 cities, ahead of Paris, Hong Kong, Shanghai, Moscow and Beijing but behind the other 14 cities (only Frankfurt makes it into Numbeo’s top 20).
It would seem that being a top performing world city comes at a price. Pollution can be higher (though London’s is slightly below average), and real estate costs in the 20 cities are significantly higher than in other global cities but, surprisingly, London’s are not among the highest when mainstream housing costs are measured against average household incomes.
This dubious honour belongs to Hong Kong, Beijing, Shanghai, Moscow and Singapore. Traffic congestion and long commutes are another side effect of economic success but London does not fare too badly here, in comparison to other world cities. If Numbeo is to be believed, London’s main downfall in the quality of life rankings (in common with most of the other 20 cities) is that the purchasing power of individuals is low, in relation to average incomes and consumer prices are high.
A rapidly expanding employment base is underpinning a new wave of expansion in London’s office markets. New records were set in the leasing markets in 2014, with 8.2m sq ft leased in the City of London. Reaffirming London’s status as one of the most important global centres for the creative, media, entertainment and tech industries, the capital has seen a general shift in occupier demand from west to east.
This in turn has been reflected in fast-rising office rents. The proportion of office take-up by creative and technology companies in the City of London was 17% in the year to June 2015, the same as the proportion taken by insurance and financial service companies.
However, it is worth noting that the banking sector has started to recover this year, and this means banking and finance companies currently account for 38% of current requirements across central London. A buoyant occupier market underpins record investment – London is the number one destination for cross-border investment into offices globally.
Rapid employment growth puts further pressure on London’s housing market. New housing supply has failed to meet the need and the pressure on living costs has continued to build. House prices in London have risen by 43%, and private sector rents by 19% over the last five years according to the ONS. Investment in transport improvements is essential to open up new parts of the city for housing development. Crossrail, an upgrade to Thameslink services and an extension to the Northern Line, is unlocking new development in the near term.
The focus of London government at present is ensuring that sufficient and affordable accommodation is provided to house London’s growing population. There is concern that a combination of high land prices, low industry capacity and a historic undersupply backlog will continue to thwart these intentions.
</div>
</div>
</div>
<a href="/images/2015/07/17/london.jpg" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/17/london.jpg" alt="" width="868" height="656">
Global urbanisation and the focus by people on city living has meant that international investment activity has also been focused in this way. Worldwide, prime city property has appreciated in value but mainstream property has not grown by so much. This is as true of London as any other global city.
The impact of overseas investment by private individuals in world cities seems to have pushed up prices for wealthy people in the prime markets, but not so much for mainstream property in secondary markets.
<a href="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%202.05.05%20PM.png">Click to enlarge</a>
<img src="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%202.05.05%20PM.png" alt="">
London’s prime residential real estate is seven times more expensive than its mainstream housing, compared to New York’s, for example, which is only four times the price. The higher incidence of overseas property buyers in London has created an international market in prime property but London’s mainstream property is about the same price as New York’s.
<a href="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%202.55.41%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%202.55.41%20PM.png" alt="">
At a global level, mainstream London property prices are on a par with Singapore and New York and cheaper than Hong Kong’s (all of these cities have growing populations and constrained land supply). This still makes London one of the most expensive locations in which to buy property globally, but the issue seems to be one of high demand against near-static supply, rather than the weight of money pressing on prime markets.
It is when new development is overly concentrated in prime markets that these supply problems are exacerbated. London has been able to grow the size of its prime stock but has been less successful at growing its mainstream housing supply. London has several possible solutions to its issues of high home prices:
<ul>
<li>Densify and make better use of land, especially in central and transport- accessible neighbourhoods</li>
<li>Open up new areas with new transport infrastructure</li>
<li>Regenerate low-grade and low-density land, both publicly and privately owned</li>
<li>Intensify neighbourhoods by mixing residential into low-intensity retail and workspace uses</li>
<li>Expand beyond political boundaries, a significant proportion of London’s workforce lives outside greater London already.</li>
</ul>
Until most or all of these solutions start to change the supply of housing in London, the city is likely to remain among the world’s most expensive. 
<a href="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.49.14%20PM.png" target="_blank">Click to enlarge</a><img src="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.49.14%20PM.png" alt="" width="1362" height="713" style="line-height: 1.3em;">
London, unlike many former hosts of the Olympic Games, saw both visitor numbers and spend increase in its post olympic year, a trend that has continued. London is expected to welcome 18.8m international overnight visitors in 2015, and has topped the Mastercard’s global destination Index in four out of five years, except 2013, when bangkok held the lead position. London also topped the rankings for tourist spend at $20.2bn, with a significant chunk of this spent shopping.
London’s world famous shopping streets and its variety of international brands, including home grown ones such as Burberry, have helped to increase international tourist spend. But it has been London’s ability to attract high spending tourists that has really established it as a Global retail destination.
The biggest spenders have been those coming from the UAE and China. They each have an average spend per transaction of over £900 (US$1,400). The fact that China is now the largest consumer market of luxury products globally, with an increasing proportion of this spend taking place overseas, means that they are an attractive target consumer group – particularly for luxury brands.
At present Chinese tourists account for only a small proportion of total overseas spend in the UK. According to official data from the ONS 233,000 mainland Chinese tourists came to the UK last year with a total spend of £559m. This represents only 2.6% of total overseas spend.
In contrast France attracted over 1 million Chinese visitors. The difficulties experienced by Chinese visitors in obtaining visas has been cited as an issue contributing to these lower visitor numbers. Improvements to the visa application process, introduced last year, are expected to improve these numbers.
VisitBritain is hoping it will help to attract 650,000 Chinese visitors by 2020, with spending power of almost £1.1bn (US$1.7bn).
London’s position as one of the largest city markets for international tourists, and the potential upswing in Chinese visitor numbers, has attracted increasing numbers of international brands.
Since 2012, 98 international brands have opened their first UK store in London with another 11 expected by the end of the year.
New entrants
The majority of these new entrants have come from Europe (64%), with another 25% originating from North America are now also, largely reflecting the existing international mix of retailers on London’s key shopping streets.
However, retailers from Asia Pacific and South America have established a presence in London, reflecting the increasing globalisation of London’s retail landscape and its visitor profile. This influx of new retailer entrants, combined with availability constraints on the traditional key pitches, have helped to open up new retail ‘destinations’ within London.
<div class="page" title="Page 18">
<div class="layoutArea">
<div class="column">
<div class="page" title="Page 18">
<div class="layoutArea">
<div class="column">
Historically, any new retail brands to London would have tended to concentrate within a relatively narrow selection of pitches. The scale of new entrants and existing demand, combined with improvements and enhanced ‘curation’ by a number of existing and emerging landed Estates within Central London has widened the variety of retail ‘destinations’ available to both occupiers and shoppers.
</div>
</div>
</div>
</div>
</div>
</div>
The top locations of choice for new overseas retailers to London since 2012 are Westfield (West London and Stratford), Covent Garden and Bond Street.
This influx of international spend has not been solely confined to consumers and occupiers. Investment by international investors into Central London retail property has also intensified.
Total acquisition activity by overseas investors totalled £1.5bn in 2014. This represented 59.2% of total activity levels. This investor behaviour is changing the ownership landscape of some of London’s key shopping streets. And it is not just international investors that have become increasingly acquisitive. International retail brands themselves have also been on their own shopping spree.
Overseas ownership
Close to half (45.2%) of all retail units on Bond Street are now owned by overseas entities, up by 10% in January 2013. But around a third of these international owners are in fact international retailers, not investors. While retailer owner-occupation is nothing new on Bond Street, the change has been the increase in acquisition by retailers irrespective of whether they are occupiers or not.
Retailer ownership has increased by 28% since early 2013, but, only half of these retailer owned units are owner-occupied.
Purchaser motivations seem to be in part competitive and in part a way to future proof themselves against further rental growth following the strong rental uplift seen over the last three years (prime Zone A rents on New Bond Street have increased by an average of 20.8% per annum). This trend appears relatively unique to London and is facilitated by the city’s transparent and open real estate market.
On the flip side, this investment appetite from brands has also contributed heavily to competitive tension in yields and retailers becoming landlords to their competitors. In the case of Oxford Street, where the need for protectionism is less acute, overseas retailer ownership is lower, accounting for 10.0% of all units on the street.
Meanwhile, investment activity by other international investors has picked up significantly. With availability on Bond Street some overseas investors have looked to other retails streets to satisfy demand. For example, overseas ownership on Oxford Street has increased by 24.4% since early 2013.
Going forward, activity from overseas investors is expected to continue but is likely to focus on those key retail destinations where current ownership profile offers opportunity.
<a href="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.55.32%20PM.png" target="_blank">Click to enlarge</a>
 
<img src="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.55.32%20PM.png" alt="">
 
The weight of money pressing on real estate in world cities is a widely reported phenomenon. London was the second most invested world city after New York by large-scale investors in the year to june 2015 according to Real Capital analytics.
But it is not just institutions and corporations who are focused on real estate as an investment class. The type and range of players in the market has increased substantially since 2008 with Sovereign Wealth and private individuals entering the fray to a much greater extent.
A recent survey of global wealth advisers by Savills/Wealth Briefing showed that private wealth is very active in real estate with 45% investing more than a fifth of wealth in direct property holdings and 37% investing an additional sum amounting to more than 10% of their wealth in indirect property holdings (property companies and REITs for example). Only 9% of these survey respondents said their clients were planning to decrease their exposure to direct property and 13% to decrease their indirect holdings.
Much of the recent buying activity in real estate has been directed at prime property in world cities, and buying behaviour has been focused on London and top US cities. Our survey of private wealth property holdings in 2014 shows few signs of activity abating. According to the Savills/Wealth Briefing survey, 67% of high net worth private clients want to buy more real estate in North America and 63% in the United Kingdom. This compares with only 37% who are looking to buy in China and Hong Kong, for example.
One characteristic of private wealth is that it is focused on different sectors of property to institutional money. Residential property, development land and agricultural land are the three top buys on private clients’ shopping lists (72% of all respondents say their clients are looking at this sector). But offices also feature prominently, with 50% looking to buy in this sector.
The implications of this for London are that money will likely continue to press on the city’s real estate markets. For those seeking the best income returns from day one, the extent to which this weight of money suppresses yields and increases prices means for them, too much money is pointing at the city.
Consequently, we anticipate that the smart, income-seeking money will increasingly move away from the prime centre to the higher-yielding periphery and even outside of London. Some of it already is, with high-quality city markets like Oxford, Cambridge and Edinburgh already seeing significant investment activity.
Those seeking capital growth will do well to look at the underlying fundamentals of rental growth and the prospects of its continuance, as there is very little scope for further investment yield reductions to boost prices.
Meanwhile, trophy properties, such as mansions, farms and sporting estates, are also beginning to see increased activity and we expect this to grow. Access to London, even from these more far flung retreats, will still be important, so the western corridor with access to Heathrow and the world beyond will likely continue to be a favoured location.
<a href="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.55.41%20PM.png" target="_blank">Click to enlarge</a>
<img src="/images/2015/07/17/Screen%20Shot%202015-07-17%20at%201.55.41%20PM.png" alt="">
Yolande Barnes is director, world research with Savills. You can follow Yolande on Twitter <a href="https://twitter.com/yolande_barnes" target="_blank">here.</a>
</body></html>

jchancellor-FAypfDUnLy

Occupier and investor demand in London: Savills

<html><body>
Someone asked me last week if I am "bullish on property?".
It's a bit of wild concept if you think about it.
At the last count there are around 9,300,700 dwellings in Australia, and the vast majority of them I wouldn't invest in.
There are a huge number of areas that I would consider to be extremely risky, in fact, including a whole range of mining towns and regional centres, and even some larger cities with weak population growth and job markets.
My position always been that if you can demonstrate a certain level of skill and invest in the right suburbs and property types you can make a lot of money, but I wouldn't say that makes me bullish on housing per se.
In Britain, London and its surrounds has been the only area worthy of investing for my money over all the years.
In Australia, I generally stick to certain suburbs in Sydney. 
In 2007, that meant a number of key suburbs in the inner west, and even then only certain types of property. 
Last year we were buying on the lower north shore, but again only in a handful of suburbs and certain types of property. 
At the weekend, the lower north recorded another blistering auction clearance rate of 92%. 
I wouldn't get too bogged down in the weekly conspiracy theories about under-reporting: just look at the actual results <a href="https://domainmastheads.homepriceguide.com.au/saturday_auction_results/Sydney.pdf" target="_blank">reported</a> in suburbs like Kirribilli, Wollstonecraft, Cremorne and Neutral Bay. 
The lower north shore is now absolutely flying!
We expect to see Milsons Point and Waverton outperforming in 2014 too.
We try to avoid buying in heated markets, however, so we may leave the hordes to the auction frenzies at ever-higher prices now, and look elsewhere.
Next on our hit-list will include three suburbs in particular to the west and south-west, a little further out than the traditional capital growth hotspots, in order to catch the ripple effect of capital growth which is repeated in most property market cycles. 
March property prices 
RP Data will released its <a href="/expert-insights/investing/29796-melbourne-tops-the-list-of-best-performing-capital-cities-in-march-quarter-rp-data-rismark" target="_blank">property price results for the month of March</a>, which unsurprisingly will continue to report very strong gains in Australian capital cities (+2.3%) for the 10th month in a row.
Leading the way, of course, were Sydney (+2.8%) and Melbourne (+2.3%), although in fact gains were recorded everywhere in March.
Over the past 12 months, the best performing capital city has continued to be Sydney, and the worst, perhaps not surprisingly given its weak jobs market and low population growth, Adelaide.
<a href="https://1.bp.blogspot.com/-j43vYsDmeWo/Uzjzxz9ceQI/AAAAAAAAMN4/3tun4W9-5oA/s1600/RPD111.jpg"><img src="https://1.bp.blogspot.com/-j43vYsDmeWo/Uzjzxz9ceQI/AAAAAAAAMN4/3tun4W9-5oA/s1600/RPD111.jpg" width="460" height="181"></a>
Philosophy 
Like most people, my investment philosophy has changed a bit over time, but the basic principles remain the same.
About a decade and a half ago, Robert Kiyosaki wrote a book, Rich Dad Poor Dad, which showed a diagram something like the one below which demonstrates the difference between the typical financial profile of a salary earner (lots of expenses, lots of liabilities) and that of an investor (fewer expenses and lots of income-producing assets).
<blockquote>
My basic philosophy is to think of investment as being like a snowball, compounding and growing its income and capital appreciation year after year, for as long as I live.
</blockquote>
Spending less than you earn and investing the difference was a real "aha!" or "light bulb" moment for millions of people around the globe. Kiyosaki sold 26 million copies of that book alone and went on to build a substantial business empire from this one very simple core idea.
<div><img src="https://www.richdad.com/MediaLibrary/RichDad/images/blogs/rdpd-wealthy-vs-middleclass-chart.jpg" width="400" height="303"></div>
Concept: Robert Kiyosaki
Kiyosaki's point was that investors should try to avoid getting into bad debts (credit cards, car loans, school loans etc) and instead load up the asset column with your business, real estate and stocks.
My one simple big idea
Like many people I've experimented with a few different approaches, including trading or buying speculative stocks. These days I have stripped back my investment philosophy to keep it as simple as humanly possible. My one simple ideas as it relates to my investment philosophy is this: 
I want every single dollar I invest to still be going out to work for me if I live to be 110 years old. 
That's my basic philosophy, to think of investment as being like a snowball, compounding and growing its income and capital appreciation year after year, for as long as I live.
What to invest in? 
So what assets to invest in to achieve that goal? 
You can spend a lot of time analysing companies and still get it wrong. The simplest method for most average investors might be to pick out some diversified Listed Investment Companies (LICs) which have a proven track record of increasing their profits and dividends for decade after decade after decade.
I don't recommend individual stocks for others to invest in. You have to pick companies which suit your own risk profile. But this is the kind of chart that I look for:
<div class="separator"><a href="https://1.bp.blogspot.com/-iZUT2PTDq2g/Uznpgh8Z4HI/AAAAAAAAMOI/AX9f8KgSmjc/s1600/MLT.jpg"><img src="https://1.bp.blogspot.com/-iZUT2PTDq2g/Uznpgh8Z4HI/AAAAAAAAMOI/AX9f8KgSmjc/s1600/MLT.jpg" width="400" height="173"></a></div>
<div class="separator"> </div>
<div class="separator">Source: MLT Annual Report 2013</div>
<div class="separator"> </div>
<div class="separator"><a href="https://2.bp.blogspot.com/-7UCvvjPl6TU/Uzn3J6MCj2I/AAAAAAAAMPA/lWOyNZnEWAY/s1600/WHF.jpg"><img src="https://2.bp.blogspot.com/-7UCvvjPl6TU/Uzn3J6MCj2I/AAAAAAAAMPA/lWOyNZnEWAY/s1600/WHF.jpg" width="400" height="236"></a></div>
Source: WHF Annual Report 2013
If a company can achieve this type of result with its bottom line profits with its and franked dividend payments then the share price will likely take care of itself over time.  Through investing in these types of diversified companies your dollars can go to work for you from now until... forever.
You don't even need to know what the wires do, although of course, you can lift the cover plate and see what the inner workings are up to if you so desire.
<div class="separator"><a href="https://3.bp.blogspot.com/-m6Ug96wmaaE/UznqPMdYIPI/AAAAAAAAMOQ/Yg_SYJCw978/s1600/BKI.jpg"><img src="https://3.bp.blogspot.com/-m6Ug96wmaaE/UznqPMdYIPI/AAAAAAAAMOQ/Yg_SYJCw978/s1600/BKI.jpg" width="400" height="317"></a></div>
<div> </div>
<div>Source: BKI Annual Report 2013</div>
<div> </div>
<div class="separator"><a href="https://1.bp.blogspot.com/-a8UdJKNChMo/Uzn2XPoACII/AAAAAAAAMO4/eTCnft7XLm0/s1600/ARGO.jpg"><img src="https://1.bp.blogspot.com/-a8UdJKNChMo/Uzn2XPoACII/AAAAAAAAMO4/eTCnft7XLm0/s1600/ARGO.jpg" width="400" height="371"></a></div>
Source: ARG Annual Report 2013
Companies may in theory be perpetual but, surprisingly, many of them come and go. How much more re-assuring it is to be invested in a company which holds 100-120 top companies and trusts? Even if one of the companies held experiences a huge corporate fraud or failure, the investor should not be hurt too much. I covered in more detail why I like LICs <a href="https://petewargent.blogspot.com.au/2013/04/5-reasons-to-consider-lic" target="_blank">here</a>.
Real estate 
I apply very similar principles in property investment. I want to invest in cities which will still be thriving if I live to be 110 years old. That means that for the core of my portfolio, I tend to steer away from small regional cities or one-industry towns. 
It's no coincidence that my company has offices in London and Sydney, by the way, for those are two cities with tremendously strong fundamentals for the long-term.
Knight Frank reported yesterday that London prices are up by 68% in the last five years since March 2009. How on earth, and why on earth, is that happening? 
It's partly because of desperately inadequate construction. Parts of the market are desperately undersupplied and the activity in the market resembles a feeding frenzy at the moment.
It's also because in recent times, there has been a tremendous shift of funds towards residential real estate as a store of wealth, but only in certain key global cities. It's fairly obvious why prices have been growing when you consider this chart.
<div><img src="https://www.zerohedge.com/sites/default/files/images/user5/imageroot/2014/03/London%20market_0.jpg" width="400" height="322"></div>
<div> </div>
<div>If you know your history, you'll know that London has had something of a rollercoaster ride as a city.</div>
<div> </div>
<div class="separator"><a href="https://1.bp.blogspot.com/-gLopaBB9AhA/UzntvXvbM7I/AAAAAAAAMOc/wCMOLBe16KE/s1600/LONPOP.jpg"><img src="https://1.bp.blogspot.com/-gLopaBB9AhA/UzntvXvbM7I/AAAAAAAAMOc/wCMOLBe16KE/s1600/LONPOP.jpg" width="460" height="275"></a></div>
Centuries ago we had wars, plagues and even a Great Fire, and from the Second World War through to 1991 the city population declined for five consecutive decades as the city de-industrialised and went through a process of slum clearance and suburbanisation. 
Since 1991, London has been busy establishing itself as a major financial centre, and international migration combined with an economic boom has seen the population explode from 6.4 million to above 8.1 million. London's population has been increasing at twice the speed of that of the rest of the UK and is expected to surpass 9 million by the end of this decade.
Importantly, the population in inner London has often been expanding at the same percentage rate as that of the Greater City of London, despite the limited availability of land. I don't worry too much what the talking heads in the press consider likely to happen this year or next. I just know that over the decades, London property will continue to represent an absolute no-brainer.
Sydney
As a newer city, Sydney has not been through such a rollercoaster ride: the population trend is simply up, up, up and away.
The below is a dated population projection from the Bureau of Statistics. More recent data suggests that the estimates have been under-cooked and that Sydney's population could rise much more rapidly still than this (click chart) to <a href="https://www.afr.com/f/free/national/why_australia_needs_to_get_real_7hEC3IX0RZWitSkELPcJEI" target="_blank">around 8 million by 2050</a>, instead following the trajectory of the red line (click chart). 
<div class="separator"><a href="https://4.bp.blogspot.com/-bS0zccQITYI/Uzn49dmzSuI/AAAAAAAAMPM/WMo25KmGhDU/s1600/POPSYD.jpg"><img src="https://4.bp.blogspot.com/-bS0zccQITYI/Uzn49dmzSuI/AAAAAAAAMPM/WMo25KmGhDU/s1600/POPSYD.jpg" width="460" height="245"></a></div>
So much energy is diverted towards what might happen to prices in the next 12 months, but as an investor, inactivity can actually be your greatest friend. 
As for the flow of international funds, well let's be blunt: this will have very little (if any impact) on regional centres. The impact will be felt most keenly in inner Sydney where land is scarce, and inner Melbourne.
Through owning properties in suburbs where the supply is fixed you can be assured that your dollars you invested in investment properties will still be out there working for you for decades and decades to come. And more comforting still, the nature of compound growth means that they gains just get better and better over time. 
You can visit <a href="https://allenwargent.com/" target="_blank" rel="nofollow">AllenWargent</a> property buyers (London, Sydney) or Pete's <a href="https://petewargent.blogspot.com/" target="_blank" rel="nofollow">blog</a>.
His new book '<a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank" rel="nofollow">Four Green Houses and a Red Hotel</a>' is out now.
</body></html>

pwargent-M4siyDbqQY

My basic investment philosophy

<html><body>
<h1>London 1970 - 1976: A case study into Real Estate Market Cycles<a class="next on" href="https://www.jll.com/cities-research/london-case-study-lessons-learnt"></a><a class="prev on" href="https://www.jll.com/cities-research/london-case-study-background-causes"></a>
</h1>
<h2>JLL came up with seven factors that contributed to the <a href="https://www.jll.com/cities-research/london-case-study-1970-1976" target="_blank">1974 London office market crash</a>.</h2>
<div class="page-content">
<div class="factors-content factors-content-1">
1. Strong business cycle
Financial deregulation in the United Kingdom was followed by an expansion of international banking and financial services. This resulted in a rise in occupier demand for office space and increased floor space per worker. At the same time, public sector demand for office space in Central London increased. The temporary shortage of space resulted in rising rents and capital values. Therefore, financial deregulation increased the demand for office space in London, while at the same time facilitating the financing of additional construction leading to increased supply.   2. Property development cycle
The London office construction boom was highly speculative due to a lack of pre-committed tenancies. While occupier demand increased steadily and rents rose by 90% between 1970 and mid-1973 (compared with a 30% rise in consumer prices) the supply of new space took several years before reaching completion.   3. Price distortions due to regulation
From 1964 onwards the Labour administration enacted legislation limiting new office development (Control of Office &amp; Development Act of 1965) and imposed taxation (Land Commission Act of 1967) on property development gains, thereby disincentivising new construction. The corporation tax (1965) favoured direct ownership of property assets. Together, these regulatory changes stimulated investor demand while constraining supply, hence exerting more upward pressure on values. These policies were later reversed by the Conservative administration of Edward Heath from 1970 to alleviate the supply shortage. However, by then, easy credit was providing further stimulus for consumer and asset price inflation.   4. Lending boom and gearing ratio increases
The expansionary economic policy of the Heath government from 1971 led to low interest rates and a rapidly increasing money supply. The result was a credit growth boom. Since property values were rapidly increasing, banks concentrated their lending to this sector. Gearing ratios, often based on inflated values, increased beyond traditionally safe levels (up to 100%). Developer-borrowers were servicing their debt with additional loans solely in anticipation of capital appreciation. The office market boom, and subsequent bust, might be seen as collateral damage from the policies adopted to stimulate the broader UK economy.   5. Financial liberalisation
Sections 123 and 127 of the Companies Act of 1967 had spawned a category of secondary (fringe) banks without explicit regulatory oversight. These financial institutions relied on the ever-growing money markets as a source of (largely short-term) funding. The Bank of England's laissez-faire stance towards the loosely regulated secondary banks failed to monitor and to limit their over-concentration of lending to the commercial building market. The 1971 Competition and Credit Control plan also advanced banking sector deregulation by removing lending ceilings and reducing the reserve ratio, thereby releasing credit for lending. Deregulation resulted in increased competition among banks for market share, which led to the erosion of underwriting standards and increased risk-taking through highly leveraged loans priced at margins that did not adequately reflect the riskiness of the exposures.   6. The economic shock
The unanticipated shock of the 1973 oil crisis further accelerated the UK inflation rate.Annual inflation rose from 7.1% (1971) to an all-time record of 24.2% (1975), prompting the Bank of England to precipitously raise its minimum lending rate (MLR) from 7.5% in June 1973 to 13% in November 1973. Those property developments that were financed by short-term bridge loans (that were susceptible to rate rises) faced liquidity problems and many were unable to meet their debt-service obligations. Simultaneously, property values stalled because of price controls that limited rent increases and a reinstated development tax that curbed profits.   7. Belated strategies to limit the economic and financial fallout
The sudden shocks arising from these simultaneous pressures led to defaults and began a potentially self-reinforcing cycle of capitulation in the property market that resulted in the Bank of England's "Lifeboat" operation. The Bank of England, with the cooperation of UK clearing banks, established a liquidity fund of £2-3 billion to support the banking system in December 1973. Institutional investors (financial, pension and insurance companies, who were often creditors to property companies) were encouraged to take over their collateral, rather than force a distressed asset sale that would further depress values across all other similar assets. Institutional investors thus became increasingly involved in direct ownership of commercial real estate. In a further attempt to limit the "fire sale" of distressed assets, a moratorium of creditors established "Cork's dam" to manage the assets of the failed Stern Group of companies. Also in December 1973 the Bank of England introduced the Supplementary Deposit Scheme (the "corset") that continued until February 1975 and intermittently thereafter.
</div>
</div>
</body></html>

Seven factors in the 1970s London office market crash 

<html><body>
Australian property prices continue to rise, according to the latest data from CoreLogic. But many investors will be scratching their heads and wondering if and when the good times may be coming to a halt.
Over the past year prices in Sydney and Melbourne have risen by over 15% and 13% respectively. Price growth in Brisbane and Adelaide hasn’t quite matched those heady double-digit heights, but at about 4% growth year on year, both cities are returning decent dividends for property investors.
The only city dragging down CoreLogic’s five city capital average is Perth; the city recording a slight uptick in December, but failing to make up for the price declines earlier last year.
<a href="https://www.propertyobserver.com.au/images/2017/01/18/CORELOGIC-DEC-19.jpg">Click to enlarge</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/CORELOGIC-DEC-19.jpg" alt="">
But what will the median price in these cities buy you in a city around the globe?
With a long history of cultural ties, the UK property market has long been a haven for keen Australian investors (by some calculations the favourite overseas property market for Australian investors). Many Australian property investors are able to purchase property in the UK, subject to tax laws, and many others hold UK or EU citizenship which allows them to (currently) purchase property with fewer restrictions.
With Brexit on the horizon, <a href="https://www.propertyobserver.com.au/(https:/www.theguardian.com/money/2016/nov/04/end-property-boom-uk-house-prices-flatline-savills-forecast" target="_blank">Savills is predicting</a> the central London property boom is about to ground to a halt. Many economists predict an economic slowdown in the UK and a decrease in immigration will temper house price and demand for rental properties, <a href="https://www.theguardian.com/money/2016/jun/10/prices-property-pensions-30-eu-referendum-questions-answered" target="_blank">while some argue</a> the fall in sterling will present great opportunities for the astute investor.
So what will the average median price buy you in London?
The current median asking price of a property in London is £1,198,081 ($1.49 million), then it won’t surprise that bargains are hard to come by. Though, keen-eyed investors may be able to pluck diamonds from the rough.
Sydney
According to CoreLogic’s December 2016 indices report, Sydney’s all-dwelling median price sat at $1,056,000.
At current exchange rates, the equivalent median price in London (£644,000) would fetch you <a href="https://www.rightmove.co.uk/property-for-sale/property-41872836">a three bedroom, two bathroom flat</a> (pictured below) in the Edgware Road precinct of West London, close to Hyde Park, Notting Hill and Buckingham Palace.
The south-east region of Wandsworth has a roughly similar median price for a studio apartment to Sydney’s all-dwelling price, <a href="https://www.londonpropertywatch.co.uk/avg_prices" target="_blank">according to London Property Watch</a>.
 <img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/ldn-1.jpg" alt="">
Melbourne
Melbourne’s median price sits at $863,260, according to CoreLogic. The equivalent amount in sterling (£525,000) would put you in the market for a 535 square foot (approx. 163 square metres), two bedroom apartment in the north-west area of West Hampstead, not far from the bustling hub of Camden Town.
The south-west region of Surbiton, not far from Hampton Court Palace has a similar median price for a two bedroom apartment to Melbourne’s median dwelling price.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/ldn-2.jpg" alt="">
Brisbane
Brisbane’s median dwelling value of $549,630 equates to roughly the price of<a href="https://www.rightmove.co.uk/property-for-sale/property-56887366" target="_blank"> a £335,000 studio flat </a>in the rapidly changing area of the Isle of Dogs in East London.
The area may be the home of EastEnders but the area is now being known for its rapidly shifting cityscape and a Brisbanite may feel content with a property parallel. The north-west suburb of Kingsbury in London has a comparable median price, according to LPW.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/ldn-3.jpg" alt="">
Adelaide
Adelaide has the lowest median dwelling value of the five included in CoreLogic’s aggregate, at $472,000.
The British equivalent of £288,000 would have an investor in the market for a<a href="https://www.rightmove.co.uk/property-for-sale/property-57242908" target="_blank"> two bedroom flat property in Leyton</a>, a stone throw from the Olympic Stadium.
The suburb also would match Adelaide’s all-dwelling price, albeit only for a one-bedroom flat.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/ldn-4.jpg" alt="">
Perth
Perth’s property market may have declined in the wake of the end of the mining boom, but its all-dwelling value still eclipses all bar Sydney and Melbourne in CoreLogic’s five city aggregate. Its median value of $581,280 would be put a buyer in the London market in the range of a £350,000 one –bedroom flat in the southern region of Stockwell.  The 605 square foot apartment is close to the bustling region of Brixton.
A two bedroom flat in the north-west region of Hendon would be similar to Adelaide’s median price.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2017/01/18/ldn-5.jpg" alt="">
</body></html>

jake-cSmGT7VXVf

What will Australian property prices get you in London?

<html><body>
The Bank of China (Hong Kong), HSBC and ING recently closed one of the UK’s largest real estate financing deals by securing the finance for the acquisition of an iconic building in London, known as the ‘Cheesegrater’.
The 46-storey Leadenhall Building was bought earlier this year by Hong Kong-listed real estate company C C Land Holdings Limited for £1.15 billion.
The three leading banks acted as joint mandated lead arranger, joint bookrunner, joint coordinator and joint hedge coordinator by providing financing for the asset. 
The deal marked the largest acquisition of a single building in the UK since December 2014, when the HSBC Tower in Canary Wharf was acquired for £1.174 billion, and underpins the strong global investor interest in London’s real estate market.
C C Land’s deputy chairman Dickie Wong said the company was confident about the long-term prospects of the London property market.
He said C C Land “will continue to look for potential investment opportunities in this city, especially on those trophy and iconic buildings similar to The Leadenhall Building”.
Mike Shields, head of Real Estate Finance UK, USA &amp; Asia, ING Bank, added that the  transaction shows “our expertise in financing landmark office properties and is a perfect mix of our leading UK real estate finance franchise and ING's extensive network in Asia”.
The transaction was one of the most significant real estate financing deals to be agreed in London in recent years, added Andy Armstrong, global co-head of Corporate Real Estate HSBC. 
The Leadenhall Building is the tallest building in the City of London, and the acquisition was dubbed as China’s biggest investment in the UK property market, The Telegraph had reported. 
</body></html>

jonathanchancellor-7SQnKwU6yx

ING, Bank of China and HSBC close financing deal for London's 'Cheesegrater' 

<html><body>
Wang Jianlin's Dalian Wanda Group has sold the One Nine Elms project on the south bank of London's River Thames.
Guangzhou R&amp;F Properties Co. is the buyer, according to Bloomberg and Reuters.
Bloomberg also report the imminent sale of its $1.2 billion Circular Quay, Sydney project and the $900 million Jewel complex on the Gold Coast.
Nine Elms is project billed as worth 700 million pounds on completion. It has planning approval for an apartment tower of about 56 stories and a five-star hotel.
Wanda paid 88.8 million pounds for the plot in 2013, a Land Registry filing shows.
Its sale adds to more than $9 billion worth of disposals over the past year as the real estate-to-entertainment group responds to government pressure to pare debt and focus overseas investments on assets considered strategically important to China.
The conglomerate, which has businesses that range from real estate to football and cinemas, had initially said it wanted to transfer ownership of some its overseas assets to its holding company as part of a restructuring, keeping them within the group. 
But the sale has instead gone to Guangzhou R&amp;F Properties, a firm that has purchase other Wanda property assets.
Wang’s Wanda Hotel Development Co. said in November that it was doing a strategic review of its projects stretching from Sydney to Chicago and would consider opportunities that create value for shareholders.
</body></html>

j.ballantyne1990-6AQqhLzZaK

Wang Jianlin's Dalian Wanda Group sells the One Nine Elms project  

<html><body>
Lendlease have announced it had been selected as preferred bidder for a major redevelopment of London’s Euston station.
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
Subject to the finalisation of contracts, Lendlease will work with the Greater London Authority and London Borough of Camden to develop a masterplan for, and subsequently deliver, a 54-hectare site above and around the new station. 
Currently catering for around 42 million passengers a year, Euston will be redeveloped to house new high-speed rail services (known as HS2) connecting the Midlands and north of the UK to London, and is due to start operating in 2026. 
The project comprises more than 400,000 square meters of commercial, retail, hotel and leisure spaces, and will also deliver a significant number of new homes. 
Lendlease Chief Executive Officer International Operations Dan Labbad says the redevelopment of Euston stands to be a real gamechanger for commuters across London and the UK.
“Euston will be much more than a transport hub – and we’ll work closely with project partners to provide benefits to local people, foster business growth and deliver new homes. 
“Today’s announcement is consistent with our stated strategy to grow our development pipeline in gateway cities and increasingly reallocate capital to our international operations.” 
</div>
</div>
</div>
</div>
</body></html>

jrobinson-rf4aSBido9

Lendlease preferred bidder for London’s Euston station redevelopment

<html><body>
A deal has been agreed to begin work on the world’s largest apartment towers built using modular construction.
The twin-tower scheme of build-to-rent flats in Croydon, London will on completion have 550 apartments.
Set at <a href="http://101georgestreet.co.uk/" target="_blank">101 George Street</a>, it will comprise two towers at 44-storeys and 38-storeys.
Tide Construction is set to team with investors, Greystar, the US multi-family giant and investment company Henderson Park.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/21/croydon2.jpg" alt="">
The part-38, part 44-storey tower will reach 442ft, from nearly 1,500 modules, and take just 24 months to build.
<div class="page" title="Page 1">
<div class="section">
<div class="layoutArea">
<div class="column">
Tide’s associate company Vision Modular Systems will build the scheme. VMS is one of the UK’s largest providers of volumetric construction modules, manufactured at its factory in Bedford. 
Tide and Vision recently completed Apex House in Wembley, the tallest modular tower in Europe, for Scape. At 29 storeys the student development uses 679 modules for 580 student beds. It was built in less than 12 months.
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/3/21/croydon3.jpg" alt="">
Simon Bayliss, managing partner at HTA, said the technological advances made in modular construction mean that projects of this size are possible in London.
"The towers at George Street show that choosing to go modular doesn’t mean you must sacrifice great design," he said. 
</div>
</div>
</div>
</div>
The towers scheme, drawn up by HT Design, will be worth over £150 million.
Presently, the tallest prefabricated building in the world is a 32-storey block in New York.
Tide is both a development and contracting company.
101 George Street is the fourth project Greystar and Tide Construction have delivered using modular construction and, once complete, will bring the total number of units the partnership has delivered in London to 1,700 units.
Modular construction is highly suited to rental developments as investors and operators can welcome residents into their homes sooner and open the revenue streams earlier.
</body></html>

London

Editor's Picks

Have something to contribute?

Developments

New apartments

New townhouses

News

London

Editor's Picks

Receive the latest news stories to your inbox

Have something to contribute?

Developments

New apartments

New townhouses

News