The development and real estate sectors have been through a rough patch recently, as the economic crisis hit and turned profitable deals into minefields. But all that is changing. The global economic climate is hugely different now, and into the UK development field enter overseas investors eager to capitalise on changing fortunes. In particular, an influx of foreign investors has led to land in London being snapped up. Overseas investors are pushing the number of deals to a level only previously seen before the economic crisis hit.
Overseas Investment in London Property: Facts and Figures
CBRE, the property adviser group, have released figures that show buyers shelled out £1.8 billion on London land in the second quarter of this year alone. This figure is the highest amount to be spent on land in the capital since 2007. The amount spent on land in central London has grown 118 percent every year. But the biggest news is that around 75 percent of the buyers had foreign money to spend. Property development finance is increasingly being funded by overseas investors, it would appear.
Where are Foreign Investors Targeting?
Some of the biggest sites in London are in development thanks to money from abroad, including the Battersea Power Station and the Royal Docks. In the case of Battersea, this project is funded by a Malaysian group, and the Royal Docks are developing into the Asian Business port with the help of Chinese capital. Some of the most expensive property in London has also been secured by foreign investors including £428 million for a combination of three locations that are being developed by a Malaysian group in conjunction with Ballymore, the Irish group. A group from Singapore and Malaysia recently paid £308 million for offices including Ludgate House. Residential development finance is also being boosted by foreign investment – half of the deals have been for home development.
Rapid Real Estate Development
According to experts, the market for London land for constructing new property developments is booming. London has a housing shortage that keen developers are looking to capitalise on. Only around 18,000 homes were constructed last year in London, while the city needs around 52,000 more to fill the shortfall. In addition to a housing shortage, there is also a lack of quality office space in London and, again, developers are moving in to meet demand. The leasing market for office property is strong and many developers – overseas and home-grown – are taking advantage of the opportunities.
However, speculative development requires access to funding, and where there is demand there is also likely to be a lack of opportunities – funding options can be limited and developers are becoming increasingly savvy about new areas of funding and ways of securing finance for large developments in the capital. Different forms of finance from stretched debt to joint venture funding are explored as developers realise the potential of sites in central London.
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