The London Residential Investment Index recorded a total investment return of 17.9% for the year 2000 against the total UK commercial property of 10.4%. Adding the impacts of active management, through refurbishment, trading and development, further boosted the sector to 22.6%.
Nigel Chegwidden, head of research at Cluttons, says: 'Over the last five years, London residential property has outperformed UK commercial property, government bonds and equities. And it is not just the strong performance that is impressive but also the consistency.'
Analysing performance over the last eight years, when London residential property began to emerge from the recession of the early 1990s, shows an average return of 17.8% per annum as against 12.3% in UK commercial, 11% in UK Government bonds and 13.7% in UK equities.
Residential property in inner London should be considered as part of a balanced multi-asset portfolio according to Chegwidden. He notes: 'London residential total returns, in any given year, display almost no relationship with either UK Government bonds or equities, implying that this sector has strong risk spreading characteristics.'
London residential also has a lower correlation with UK equities than commercial property, implying that investing in homes provides greater security against the volatility of equities than the commercial sector.
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