Foreign deal-makers accounted for 57 per cent of London real estate investment in 2022, compared with 65 per cent in 2015, MSCI data showed
London’s real estate market is gearing up for a pivotal 2023, following years of turbulence which slowed the torrent of foreign money that once flowed to the capital.
Cross-border investment flows to properties in London totalled £12.4 billion in 2022, showed data compiled by MSCI. That is a big drop-off from the £30.5 billion of foreign deal-making in 2015, which preceded the twin blows of Brexit and the Covid-19 pandemic.
London, which has long attracted huge swathes of foreign investment and drew in the most capital inflows of any global city in the first half of the year, faces uncertainty over property valuations as interest rates rise and in the wake of political chaos triggered by September’s mini-budget. Foreign deal-makers accounted for 57 per cent of London real estate investment in 2022, compared with 65 per cent in 2015, MSCI data showed.
Market liquidity is currently severely affected by a wide spread between buyer and seller pricing caused by the uncertainty of how the rise in interest rates will crunch property values, said Sue Munden, a senior analyst at Bloomberg Intelligence.
Transaction volumes may be weak until inflation has been controlled and interest rates settle, she said.
Britain’s 2016 Brexit vote briefly diverted a chunk of investment to Paris, before attention switched back to London in 2021. That mini-boom was quickly derailed by Russia’s invasion of Ukraine earlier this year, said Munden.
Still, London’s appeal as a destination for global investors and a weaker pound should keep overseas investment afloat in 2023, she said.
While this plays out, the percentage of international buyers may stay above the 50 per cent mark, especially given the weak pound, Munden said.
She said: The long-term confidence in London as a global city continues to make it a preferred investment market internationally.