The long–run performance of total returns in Prime Central London residential property and estimating changes in correlation to alternative asset classes

Residential property in Prime Central London (PCL) is a market with potentially half a trillion GBP in assets. Whilst various measures of capital growth of the market are available, information on total returns are far harder to come by.Whilst changes in capital growth are widely discussed in media and print the PCL residential is a sizeable market that has come under less academic scrutiny than other property asset classes. With growing investor interest in segments such as the private rented sector there is an increasing appetite for analyses focused upon residential property in the UK.In this study we use Knight Frank propriety information on aspects of the PCL market to construct return indices. We then analyse the sensitivity of PCL returns to returns in other asset classes, including alternative UK real estate sectors. We focus upon modelling correlation shifts between PCL and other asset classes during times of market growth and decline. The indices and analyses conducted in this study will provide results that will benefit and better inform actors such as private and institutional investors in the market.