Over the next five years, we expect the capital value growth of Prime Central London residential assets to outperform many commodities markets and perform in line with West End offices and UK gilts, with additional rental growth on top.

In an investment world searching for yield and security there are few options for investors. As illustrated in the gallery, capital growth in the non-yielding commodities, such as gold, could come a long way behind our forecasts for Prime Central London residential property, which is increasingly heralded as a store of value in uncertain times.

UK property is also a sterling-dominated asset, which makes it look cheaper by international standards and can be particularly attractive to overseas investors looking for an additional currency play.

Attractive prospects

We even expect UK mainstream residential property to look attractive in the medium-to-long-term. Historically, gold has been the asset of choice during economic uncertainty but Oxford Economics predicts, as do others, that the price of it and other commodities will fall at some point.

The income-producing nature of residential real estate as well as the potential for real-world added value and sound capital growth prospects means that the case for housing investment looks increasingly supportable (see Table 'Relative performance of different asset classes').

Taken from
Residential Property Focus, Q4 2011