Collapsing oil prices and the effect on UK property
Published Mar 11th 2016
1 min read
There seems to be no end in sight for low oil prices, with prices falling to around $30 now, from over $100 in 2014 (Bloomberg). While oil demand growth has slowed, mainly due to a cooling Chinese and global economy, the supply glut continues. OPEC failed to agree any supply cuts in December 2015 and Saudi Arabia is continuing its policy of maintaining market share at all costs (Forbes). Most oil-producing countries are now running a large budget deficit, in the case of Saudi Arabia at 15% of GDP (Reuters) and have been scaling back government spending across the board.
They have also begun to liquidate and repatriate significant investment holdings overseas (FT). The impact on the UK and London market will principally be felt in scaled back investments in large commercial deals and in prestige residential developments (Arab Bankers Association).
On the positive side, buyers from oil producing countries still regard London and the UK as a safe-haven destination. While there is no definitive data to back this up yet, anecdotal evidence and customer enquiries point to an increased focus on the mid-market in London, such as one bedroom properties in Zone 1, or two and three bedroom properties in Zones 2-4. Garrington also expects increased investor appetite for properties outside London, such as City centers and country homes. Rather than focusing on prestige, landmark property investments, the oil money seems to be entering the mainstream market.
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