Foreign investors sink £30bn into London property

Foreign money flocked to London in 2012 with £7.3bn being sunk into the capital’s property market in the last three months alone.

Some £30bn has been invested since the start of 2012 due to foreigners seeking perceived safe havens, according to figures released today.

The report, conducted by commercial services firm CBRE, found that London was already 15% up on last year’s investment, with two months still left until the end of the year.

Most of the investment has gone on office space, shopping malls, commercial properties and luxury residential homes.

The annual return on these kinds of properties stands at an estimated 4% in Central London and 5% in the City. This makes them more attractive investments than traditional alternatives such as bond buying, CBRE found.

London also accounted for some three-quarters of all UK transactions in terms of value. This makes the city the single most desirable property investment location in Europe, and London outstripped all other EU countries.

“International buyers have been dominant over the last 12 months and it is fair to say that they are making the market for major central London offices,” says Jonathan Hull, CBRE’s head of European capital markets. “What clearly shows through is the focus on investors on prime property and risk avoidance.”

There has been a major shift in investor origin though. Russian and Emirati buyers who have long propped up the London market are starting to take a back seat to East Asian demand. Malaysia in particular seems hungry for a piece of the London pie.

Global real estate service provider Jones Lang LaSalle estimates that Malaysian investment accounted for 10% of London’s total. This is largely due to ongoing plans by Malaysian pension fund, Employees Provident, to sink £8bn into renovating Battersea Power Station.