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Gross Domestic Product
Office for National Statistics
Overseas property investors are not expected to be deterred from entering the UK real estate market by the latest gross domestic product (GDP) figures. A preliminary estimate from the Office for National Statistics for the first three months of this year indicated GDP fell by 0.2 per cent, making this the second consecutive quarter of decline. However, head of residential research at Knight Frank Liam Bailey does not believe this will have a negative impact on property investment, explaining purchasers are more concerned with the long-term prospects of real estate assets than short-term fluctuations in the country's economic growth.London, in particular, is unlikely to be affected by the announcement the UK has fallen back into recession, he asserted. "Demand from foreign buyers has been strong for the last two to three years. Even though the pound has recovered some ground against the euro, that has still not stopped foreign buyers from coming into the market," Mr Bailey stated. He added "the fundamentals that have drawn them into London haven't changed", so the latest news of weakening in the UK's economy is not something that will overly concern property investors.A report published by Cluttons earlier this month backs up Mr Bailey's assertions, noting investors are looking at the long-term performance of London's property market against other international cities, instead of concentrating on short-term challenges. Head of research at the firm Sue Foxley said yields in the UK's capital are still "attractive", while "the underlying drivers of growth in values and rents will persist over the medium term". Both institutional and private investors recognise these factors, she concluded, which is why activity in London's market has remained strong despite the worsening economic climate both in the UK and the eurozone.During a webinar for Property Week, Richard Barkham, group research director at Grosvenor Group, suggested investors are accounting for key tail risks - such as the possibility of a new global recession led by the eurozone - when pricing property investments. He added "core real estate is probably where you want to park your money" in the event that the world does see its economic growth hit by a new recession.
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