Overseas investors cash in £3.4bn of London property

A wave of mainly Asian investors have been making quick profits from sales of some of London’s largest office buildings, as the commercial property investment boom in Britain’s capital city showed little sign of abating.

Companies that bought properties after the credit crunch that ended in 2009 have cashed in £3.4bn of London property — pocketing £870m in profits — in the past two years, according to analysis by property advisers Cushman & Wakefield.
Cash-rich investors seeking returns in an ultra-low interest rate environment have pushed the total value of property markets around the world to record highs, adding to fears that a bubble is forming.

Total investment volumes in the central London market hit a record £24.6bn last year, Cushman & Wakefield’s figures show — topping previous record deal volumes in 2013.

The most profitable deal to date was South Korea’s National Pension Service sale of HSBC’s Canary Wharf headquarters last autumn for £1.2bn — the highest price fetched for a single London building — generating a profit of more than £400m for the Koreans.

James Beckham, head of Cushman & Wakefield’s central London investment team, said that the burgeoning appetite of prospective buyers from around the world made it tempting for property owners to sell up and cash in. The biggest buyers in the city this year have been Canadian and US investors, according to Cushman, investing £6.5bn between them.

In particular, Malaysian and Korean investors were selling up, Mr Beckham said, but added that there was likely to be “substantial and continued liquidity from other Asian investors”.

Richard White, head of UK real estate at KPMG, said the London market was “feeling rather like 2005”.

“As prices rise, the risk versus reward axis is looking increasingly out of kilter,” he said. “London’s exposure to highly mobile equity funds makes its market extremely volatile.”

The foreign investors selling London office blocks are not the only ones stepping back from the capital’s red-hot property market: its biggest housing development area, Nine Elms, is seeing a wave of “flat-flipping” as investors try to sell unbuilt properties amid fears the capital faces a glut of expensive homes.

Source: Financial Times