London still central to business

26th August 2016

Central London’s status as a global centre of business shows little signs of change since the EU referendum, after the amount of office space leased in July reached its strongest level since March.

The appetite of businesses for offices in the heart of the capital has bounced back from a dip in June before the referendum, according to CBRE.

The property adviser said that 980,400 square feet of office space was taken up in the centre last month, a rise of 24 per cent compared with June. This included a move to the City by Wells Fargo, the US bank, which was regarded as a vote of confidence from the finance sector after Britain’s vote to leave the European Union.

Emma Crawford, head of London leasing at CBRE, said: “Much has been said about the health of the London office market this year but clearly demand for office space remains buoyant. Businesses are still confident about London’s significant advantages as a global business centre, even when the UK is outside the EU.”

The positive news was echoed by the latest mortgage figures that showed more loans were handed to first-time buyers in June than at any other stage since August 2007, as a combination of competitive mortgage rates and the government’s Help to Buy scheme boosted the number of starter buyers.

First-time buyers borrowed a total of £5.5 billion in June, a rise of 25 per cent compared with a year earlier and up 28 per cent from May, according to the Council of Mortgage Lenders. The total sum equated to about 34,300 mortgages.

Homeowners who were moving took out 33,900 loans in June, an increase of 28 per cent from May and up 0.3 per cent on the same month a year ago.

June was the third month running that the number of loans for first-time buyers was running at a higher level than the number of home-mover mortgages, a trend that has not been seen for 20 years.

Low mortgage rates and government schemes such as Help to Buy for new-build homes has helped to increase the number of first-time buyers. Last May Barclays launched a mortgage that required no deposit in an effort to boost the number of its younger customers.

The recent cut in the Bank of England’s base rate could mean even cheaper mortgage deals for first-time buyers over the coming year, but this is likely to be offset by low returns made on savings for those trying to build up enough for a deposit. The average age of the first-time buyer has increased from 30 to 33 over the past 20 years.

The CML figures were mainly collected before the result of the EU referendum, meaning such positive figures could change over the coming months. Paul Smee, director-general of the CML, said: “As ever, there is uncertainty and it will take more time and patience to understand how the market will evolve in the current environment — these figures predominantly cover activity in the run-up to the referendum.”

Despite the rise in first-time buyers, housebuilders are taking a more cautious view on the market over the coming year. A report from Knight Frank showed that the price of buying greenfield land for development fell 2.3 per cent between April and the end of June, taking the annual fall to 3.8 per cent.

Gráinne Gilmore, head of UK residential research at the estate agency, said that some housebuilders and developers were increasing their margins and hurdle rates, the minimum rate a company expects to earn when investing in a project.

“This is in order to allow for increased uncertainty over the future economic landscape as the UK negotiates its way to a new position within the Europe. This is feeding into land prices,” Ms Gilmore said.

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