One thing is certain in a volatile global market, no cycle will last forever. The downturn in the global financial market last July reminded everyone that historically the UK real estate has typically gone into a downturn because of an external shock from the macro-economic environment.
A look into the past
During 1990 it was the invasion of Iraq in Kuwait that caused an oil price increase and turned hit growth and consequently a house price bubble. In the year 2007, it was the credit markets that were drying up which once again caused the crash in the house prices. In both events, commercial real estate was dragged down by the wider turmoil in the economic environment.
Here are some fast facts about the London office market:
- The entire property capital growth index increased by about .9 percent last June on a month-on-month basis which is up by .8 percent from that reported last May.
- The office market saw the biggest increase in the capital growth by 1.4 percent while the retail sector registered the lowest (.3 percent).
- The twelve month total return in investments stood at 16.7 percent.
- The investment volume for the first six months of the year was at 34.5 billion bounds which is up significantly from the 24.8 billion pounds recorded during the same period last year.
Fortunately, the downturn in the global financial market caused by Greece and the stock market crash in China as well as the tumble of the tech stocks will not likely destabilize the entire global economy. The Euro zone is decisive to hold their currency zone together. The equity market in China too has not yet attracted enough international investors to create a threat beyond its shores.
Experts are saying that the next cyclical downturn will probably be like the one that happened last July. The panic will begin in the financial market and will send aftershocks all throughout the global economy and then will eventually reach and affect the commercial property sector in the UK. This downturn will also affect other businesses like MC Decorators.