London Officially Becomes The Property Investment Capital Of The World (again)

London has become the official property investment capital of the world. The ranking comes as a result of a survey carried out by the Association of Foreign Investors in Real Estate that asked expert global investors from 21 countries to rank cities based on variables such as investment stability and their level of returns.

This is the first time London has topped the list since 2009 and is, arguably, indicative of the economic recovery the UK is enjoying. The capital was the only non-US city in the top five. It was considered the best with 24% of the votes, New York received 21% which put it in second place and San Francisco, Houston and Los Angeles came third, fourth and fifth respectively.

This comes at a time when the capitals average property price is £422,860. This will do nothing to allay fears that London is currently in the middle of a housing bubble with a 9.1% rise in prices in the last year alone.

To put this in perspective, the national average increase in house prices was 4.4% with the average house price now sitting at £206,726. It’s still the highest rise registered since Oct 2007 but has nothing on London.

So What Has Caused This Increase?

London’s property prices have boomed thanks to the global economic recovery, the same recovery that has helped boost national house prices less effectively. London has also seen a particular rise thanks to the influx of money from wealthy foreign investors eager to snap up property in London’s most desirable locations.

london-skyline-at-night

“London by Night from New Zealand High Commission” by Christine Matthews

This is partly due to the fact prime Central-London property is seen as an asset class in its own right, offering recession proof returns for any who can afford the investment. This confidence in London property investment security can be seen in the fact £7bn of foreign money was invested in London’s property market in 2013 alone.

Despite the seemingly unstoppable increase in property prices concerns are starting to be raised that demand will soon outstrip supply. With bespoke, expensive developments, such as the well known One Hyde Park springing up throughout the capital mutterings of how much demand there actually is for such highly priced properties have started.

Autumn Statement

Also, it awaits to be seen whether an announcement by the Chancellor George Osbourne in his 2013 Autumn statement will have any effect on demand. by 2015 all non-resident UK property owners will have to pay capital gains tax (CGT) when selling their properties.

With London topping the list of cities the UK also came in as the third best country for capital appreciation, pulling back from a non-placement last year. The US remained number one for the second year running with Spain coming in second.

What are your thoughts on the UK’s position as property investment capital of the world? Is the rate of price increase unsustainable or does London have a few more years of rapid growth ahead of it.