Inward investment to London real estate — why is it happening and with what impact?
For international real-estate investors, London and the UK are separate countries. London belongs to ‘globalopolis’: an elite group of global mega-cities, transcending their homelands in economic importance. Since 2008, London has attracted more than £40bn of overseas real-estate investment, while the wider UK property market has languished. This has led to some misplaced and arrogant ideas. London, some say, is a first-rate city trapped in a second-rate country, and its massive real-estate investment inflows are seen as the new (and long-term) ‘normal’.
But London is not uniquely or eternally attractive to investors. Of course, it has much to recommend it: liveability, easy access to global markets, a concentration of global HQs and high-quality buildings, an extremely liquid market and a strong, improving infrastructure. These factors ensure that overseas investors choose London, rather than other UK cities. But they are not the reasons for the scale of the flows.
Those reasons are located not in London but in the countries where the money is born. The middle and far-eastern sovereign wealth funds are holding almost unimaginably vast surpluses. Equally, the recovering US economy has given US vulture and private-equity funds renewed animal spirits and firepower. In a world where bonds are too low and equities too unpredictable, the managers of this money need to find yield and diversification. Property is one answer to their problem…
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