Singapore investment in London Real Estate
11 May 2013
Despite economic pessimism and fears of a “triple dip” in the UK, London continues to attract overseas investors, both established players and new entrants, looking for prime office buildings let on long leases to solid tenants.
There is expansive research which shows that real estate investors are being presented with a growing range of investible cities in emerging markets such as in Moscow and Shanghai as well as in high value cities in Europe, including Munich and Stockholm. But one of the most notable stories from last year was that Asian investors spent more than £2.4 billion on properties in Central London. Following the news that Singaporean property developer SinarMas Land Limited recently acquired New Brook Buildings, Covent Garden for £84.65 million, their first investment in Europe, the continuing interest and attraction of London to Asian investors cannot be ignored. Despite the increasing choice of investment locations London is amongst the top five cities responsible for nearly one-quarter of real estate investment volumes and that really highlights investors desire for investing somewhere with minimal risks and large pools of trade-able assets. The devaluation of the pound against the Singaporean Dollar since 2008 has also helped to make London more affordable to Singaporean buyers.
The economic and political uncertainty in the Eurozone has also only served to cement London’s status as a global safe haven. But it’s not just the Singaporeans that are interested. The cross-border capital inflow to and outflow from Asia-Pacific in Q1 2013 is fascinating. There has been a capital inflow to Asia-Pacific of US$2,463m, but capital outflow from Asia Pacific of US$7,465m - in other words, a net capital outflow from Asia Pacific of US$5,002m. This has to be good news for European real estate.
This year we’ve already seen big deals finalised with the likes of a Frankfurt based investment company, owned by one of the wealthiest families in Hong Kong, on the acquisition of a hotel portfolio across the UK and separately China Overseas Holdings on their £152 million acquisition of 1 Finsbury Circus, their debut acquisition outside of China. And the Chinese and Taiwanese are definitely ones to watch. Recent legislative changes will open up greater opportunities for both countries domestic insurance sector to expand and invest in overseas markets. They have the potential to be a huge source of investment for the international real estate market. Historically, the problem has been accessing it; however, these new legislative changes could unlock this potential.
So what will be the impact on the London real estate market? Are we really going to see a wave of Asian money flooding in? The recent deals seem to suggest that as long as it is a very long-term, safe income and it is in a market that is liquid enough to be able to dispose of the asset if they have to, the funds are there.
This really could fuel a very competitive London real estate market through 2013 and beyond.