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New York Nabs Global Property Crown from London | ASHARQ AL-AWSAT English Archive 2005 -2017
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A real estate sign advertising a new home for sale is pictured in Vienna, Virginia, outside of Washington, October 20, 2014. REUTERS/Larry Downing/File Photo

London-New York has knocked off London as the world’s premier city for foreign investment in commercial real estate due to fears the vote to leave the European Union would diminish the British capital’s appeal as a global financial center and despite a drop in foreign investment worldwide.

Data on cross-border property transactions indicate greater unease among investors prior to the referendum, which voters unexpectedly approved on June 23, than had been captured in the capital markets prior to the vote.

Property investors feared Britain’s exit from the EU would erode London’s role as a premier financial center and reduce the value of their investments, the majority of which are office buildings.

Cross-border capital flows into London real estate fell 44 percent in this year’s first six months from the same period in 2015, according to data from brokerage Jones Lang LaSalle Inc.

According to Reuters,concerns the UK market was coming toward the end of the cycle amid signs pricing was reaching unsustainable levels only partially explains the drop-off in investment flows to Britain, the largest decline since the financial crisis.

Norway’s sovereign wealth fund, one of Britain’s largest foreign investors, said on Wednesday it cut the value of its UK property portfolio by 5 percent because of the vote.

“It would be fair to say that London bore the brunt of Brexit fears,” David Green-Morgan, director of global capital markets research for JLL in Chicago, said in an interview. “The big fear is that London will lose a lot of the financial service jobs that has made it such a global financial center.”

New York gained $10.3 billion in cross-border investments in the first six months of the year compared with the $6.9 billion that London took in, data from JLL show. In the same year-ago period, London garnered $12.4 billion while $11.3 billion flowed to New York, according to JLL.

The 8.9 percent decline in cross-border investment New York experienced is in-line with the roughly 10 percent decline major cities experienced this year when compared to 2015, a stellar year in property investment around the world.

Prices in prime central London had already started to fall in the run-up to the referendum, thanks partly to hikes in stamp duty tax on high-end property in December 2014 and on second home and buy-to-let properties in April, according to research from consultancy Knight Frank.

After the vote, in July, prices in prime central London — from Holland Park and Knightsbridge in the west to the City of London in the east — fell by 1.5 percent, the biggest fall in nearly seven years, it said.

The deterioration witnessed by the property market came as New U.S. single-family home sales unexpectedly surged in July, reaching their highest level in nearly nine years amid robust demand, brightening the housing market outlook and bolstering views that economic growth will pick up in the third quarter.