Deutsche Bank is digging in their heels into the UK economy, buying two properties for £310 million as they push back on any Brexit concerns. The properties are adjacent to the Tate Modern and represent nine floors in the Southbank district of London.
“Despite Brexit, London is and remains one of the most attractive locations for real estate investments in Europe” Ulrich Steinmetz, who runs real estate funds for Deutsche Bank, said in the statement.
Deutsche Asset Management made the deal on behalf of its German open-ended real estate funds which has over $53.6bn (£42bn) worth of assets under management.
Previously, M&G Real Estate snapped up the properties in 2013 from Land Securities in a deal worth over £200m.
Perhaps stemming this optimism, the Bank of England raised its requirements for the amount of cash British banks have to hold as it looks to build up capital buffers against a financial system shock. British banks will be forced to hold another £11.4bn within 18 months as the countercyclical capital buffer rises first to 0.5 per cent of bank assets and then to one per cent in November.
Banks will have a year to build the initial £5.7bn buffer announced this week, and 18 months for the second slice, barring any shocks to the economy. Carney added that he expects most banks to already have enough capital to fulfil the heightened requirements.
Lenders will now have to ensure their customers can afford a rise in interest rates they pay to around seven per cent.
Some complacency may also be extending into asset prices: corporate bonds may be overpriced, while commercial real estate prices are stretching the limits of sustainable valuations, the Bank’s Financial Policy Committee said.
The Bank thinks aggregate commercial property prices are at the very top end of the range are sustainable. However, in a worrying sign for the London property market the Bank warned West End office prices have been stretched far above levels that can last in the longer term. There could be an “abrupt” readjustment in commercial property prices, Carney warned.
That said, The Queen’s property portfolio, The Crown Estate, enjoyed record returns of £328.8m last year, up 8.1 per cent year-on-year.
The total value of its property portfolio, which is concentrated in the West End, rose 5.5 per cent to £12.4bn for the year ending 31 March.
Over 400,000 square feet of retail and office space was let during the period across the central London portfolio for a total rent of £34.4m per annum, the firm revealed. The firm returns all its profit to the Treasury. Alison Nimmo, Chief Exec of The Crown Estate said: “This outperformance reflects many years of disciplined market positioning in our chosen sectors and has made our business resilient at a time of political and economic uncertainty.
“For over a decade we’ve carefully timed our development pipeline, focused on creating brilliant places in the best locations and maintained our active support of the UK’s world-leading offshore wind sector.
DMZ thinks London’s housing market is on a knife edge at present as there continues to be a lack of stability in this sector. We are seeing some signs of investors aggressively seeking out new property in London but also see lots of tentative buyers. It remains an edgy market for London bulls and bears, with legitimate arguments pitched from both sides; time will tell who has made the right decision!
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