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Will City rents increase in 2010?

A report by property consultants King Sturge claims that the rental values will increase by up to 10.5% in the City of London in 2010. While this is obviously a massive U-turn compared to the 40% collapse in rental values during the recession there is some concern about the basis upon which these forecasts have been calculated.

The consultant seems to be ignoring the fact that a number of prominent financial institutions in the UK have threatened to leave these shores because of the UK government's banking tax. While initially many believed this was nothing more than a publicity stunt and a bargaining tool by the financial sector there are signs that some large institutions are seriously reconsidering their position within the UK. If this was the case, and prominent financial institutions did leave the UK, this will do nothing to strengthen rental values in the capital and the forecast of a 10.5% increase in rents could turn out to be a little optimistic.

In many ways the London economy is separate to the overall UK economy and is very much a leader in this country. When you consider that property prices in some areas of London are now at similar levels to those seen in 2007 it is easy to forget that we are still in the grip of a recession.

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