When scanning through the London Evening Standard yesterday I spotted a report on Central London’s Property Markets, which was based on a recent research report by CBRE. Not having read the actual research report itself I am reliant on the Standard’s report but the following are the major points reported:
- £18.5bn of overseas money has gone into London office property over the past 3 years.
- Over 70% of the office turnover in London at the end of 2014 was accounted for by foreign investors, and this demand is expected to remain strong due to London being seen as a safe- haven, and to deregulation of insurers in Asia which are now looking to invest overseas.
- Currently there is an estimated £13.5bn of investment funding chasing £2.5bn of available stock. So, logically, I suppose, prices will rise.
Now, what worries me is that I can find very little debate over whether all of this foreign investment in London is necessarily a totally good thing: it seems to be just accepted that this inflow of overseas investment is good for London and the UK, and that we have nothing to worry about.
But what happens to the rents which are paid on these property investments – are they repatriated to the originating countries with all the implications for the UK’s balance of payments which that entails, or are they used to purchase, and bid up the price of, further London investments? What effect does all this investment have on the real, productive, parts of the economy rather than the rentiers?
I have some thoughts on what this could mean for the rest of London and the rest of the UK, and I will try to get time in the future to go through some of my thoughts.
But until then I would like to know if there is anyone doing some in-depth research on the wider implications for London, and the UK’s economy, of so much overseas investment flowing into Central London’s property markets? Does anyone actually care?