Investor interest in the UK’s commercial property market recorded its slowest rate of growth in more than two years, according to a survey of the country’s leading surveyors, as demand from foreign buyers waned.
In its latest quarterly commercial market report, the Royal Institute of Chartered Surveyors (RICS) found that buyer enquiries continued to rise in each sector but at a its slowest pace since the third quarter of 2013.
Demand from overseas buyers also slowed for the second consecutive quarter, in a sign that legislative changes to taxes such as stamp duty and concerns over the falling price of oil may have taken its toll.
Capital values are still anticipated to rise across the UK over the next 12 months, fuelled by prime offices and industrial real estate, as properties for sale remain in short supply.
However RICS said respondents from central London have “notably” scaled back their expectations, with the vast majority – 81 per cent – warning that the central London market is overpriced. That compared with 77 per cent who took this view in the third quarter.
That contrasted with views for the UK as a whole, where 85 per cent of respondents perceive prices to be either at or below fair value.
In terms of the current property cycle, most respondents (37 per cent) believe their local market is in the early stages of an upturn in the cycle. In London 45 per cent believe the market is in the middle of an upturn although nearly a quarter sense conditions could be approaching the top of the cycle.
RICS chief economist, Simon Rubinsohn said: “For the time being the real estate sector seems largely insulated from the turmoil affecting financial markets. Indeed, the prospect of a ‘low for longer’ interest rate environment provides further comfort for those parts of the property market where values are looking a little stretched and arguably more vulnerable to a material shift in monetary policy.
“One potential consequence of the current climate is that the trend in foreign investment could slow which is a pattern the latest RICS survey seems to be picking up. However, with the economy still set to post growth in excess of two per cent in 2016 the backdrop for the occupier market appears reasonably well underpinned.”