London is the most expensive city in the world

London is the most expensive city in the world. The British capital, which held the title for nine years, has just be dethroned by Hong Kong and Tokyo. In question, the decline of rents coupled with the diving of the pound sterling, said the annual survey of Cushman & Wakefield.

Price per metre square in the West End has thus declined 23 year last, reaching 1.403 euros per year, against 1.743 euros in Hong Kong and 1,649 euros in Tokyo. In comparison, commercial leases fell by an average of 16 in large capitals economic.

"The centre of London was the first market to undergo a marked decrease, due to the dominance of the banking and financial sectors in the City and Docklands in particular," analysis of Cushman & Wakefield report. This change in mood is clearly felt in the vicinity of Buckingham Palace. Barely more than a year ago, it was the obstacle course to get a lease for an astronomical price in the fancy neighbourhood of Mayfair. "Now when seeking local to Mayfair, it has not even begun to discuss and already six months rent are offered," reflects a banker.

Negative returns

In fact, according to Investment Property Databank (IPD), the value of the United Kingdom professional real estate fell by 27.1 in 2008, even a diving of 35.5 between December 2008 and the highest July 2007. Taking into account the income received, an investment in this asset class has generated last year, a negative performance of 22.5. "This compares to a return of 29.9 on Index FTSE All Share, of 15 on the index bond FT gilt 5-15 years and 46.6 on real estate values FTSE Real Estate Index", said RPI, the bible in real indices.

The most optimistic are already investors return, baited by the upwelling of returns above the magic bar of 7. Foreigners, whose purchasing power is reinforced by the weakness of the pound sterling, began prowling, swear some stakeholders... The end of the tunnel Indeed, most experts believe the decline be completed. "We expect a new decline in 24 of capital this year, of which 18 from the fall of the rental values," thus rarer Mike Prew and Russell Avery, financial analysts at Nomura.

In London, in particular, a phase of correction of the award began in the summer 2007, when the high interest rates were unsustainable yield weak investment in stone. The credit crunch then began a little more the values last year. "We believe that corporate defaults and rent reductions will result in 2009 a third phase in the deterioration of the prices," noted specialists in Jones Lang LaSalle.

While the United Kingdom came into récession, with a contraction of activity in 1.9 last year, the economists predict a new decline of some 2 in 2009. The severe economic downturn reflected by an explosion of unemployment and an acceleration of corporate defaults. Already, the land Land Securities in its portfolio of commercial leases, undergoes a disturbing increase in tenants placed into receivership...

The weight of financial services

In London, were questioned, the impact of the crisis is accentuated by the disproportionate weight of financial services, where personnel bleeding is faster. When the CEBR (Center for Economics and Business Research) evokes some 60,000 deletions of posts in the London-based finance, all trays deserted in the large towers of Canary Wharf or glazed buildings cossus of Square Mile. The turmoil imposes circumstances alliances: we recently saw very serious "the independent" newspaper leaving the Docklands to the premises of the "Daily Mail" Kensington tabloid...

However, to make matters worse, this crisis of the application comes at the time where the Park increased, with the arrival this year on the market of many developments launched 2004. This is true particularly in the City, the main banking district of London, which the sky remains littered many cranes. "Lower the rents of offices in the City could reach 45 by 2011 against 25 in 2008 with a vacancy rate from 4 to 14", predicts John Fraser-Andrews and Nicholas Lyle, analysts at HSBC. For a bit, the arrogant "gherkin", Tower of Norman Foster, in almost lose its metallic blue to turn grey.