The Select Property report entitled “The international investor’s guide to the UK property market” has cast a very interesting light on the habits of international investors with regards to UK real estate. It is common knowledge that the UK property market has attracted more than its fair share of overseas investment over the years, it is common knowledge that London is very much a market by itself but some of the figures relating to investment in 2013 will surprise you.
There are various elements of the report which make interesting reading, show the dynamics of the ongoing UK property market, but also highlight potential issues going forward.
Overseas investment in the UK
Perhaps one of the more startling figures associated with this report is the suggestion that 82% of real estate purchases in the City of London during the first six months of 2013 were carried out by overseas investors. This totalled in excess of £4 billion for the first six months and highlights an issue which many experts have discussed at great length. The London property market is in effect an international property market in its own right and seen by many as something of a safe haven during difficult times.
If we look at the wider situation across the UK, even though figures are not yet available for the 2013, a phenomenal £20 billion was invested by foreign buyers in UK property during 2012. This is an enormous amount of money and one which can quite literally move markets when focused upon specific regions or property types. It would be wrong to suggest that the UK is at the beck and call of overseas real estate investors but it would also be wrong to dismiss their influence in the marketplace.
Quote from PropertyForum.com : “Ed Miliband, the leader of the Labour Party, has today caused a reduction in the share price of Royal Bank of Scotland and Lloyds Bank creating a loss for taxpayers of around £1 billion over the last 24 hours. Despite the fact that the UK property market is going from strength to strength, mortgages are….”
Investment from Asia
One interesting trend, which has been replicated in many other countries around the world, is the ever-growing amount invested by Asian real estate investors. During the second quarter of 2013 it is believed that £1.04 billion was invested by Asian real estate investors, which is an increase of 166% on the first quarter of 2013. While you could argue that the first quarter of the year is often quiet but an increase of 166% is certainly nothing to be ignored.
If we look at markets such as Spain, Cyprus and Greece to name but a few, the influence of Russian and Chinese investors has been discussed a great length. It is therefore no surprise to see that Asian investors in the UK market are growing in influence and growing in number – this is something likely to continue for the foreseeable future. Indeed the UK government has been looking at ways to simplify visa applications from the Far East and tweaking the terms relating to those investing in UK property.
In many ways this increasing influx of money to the UK real estate market from overseas investors is a reflection of the growing confidence in the economy. Even though the UK is heavily committed to Europe, though decided against taking the euro, the direction of the UK real estate market is very different to that from general Europe. London in particular has always been seen as something of a safe haven by international investors and this position seems to have been cemented yet further over the last 12 months.
The only real issue is that when, and it will be when, overseas investors decide there is better value elsewhere, will the market react with a short sharp shock? As other economies around the world continue to recover, there will be opportunities for more value led investments which many Far Eastern real estate experts would be more than happy to consider.