Capital into UK property: Overseas investors remained strong competitors during Olympics

  • According to The Property Archive, Q3 UK investment volumes were relatively stable at £8.51bn, slightly down on Q2, but well up on the £7.16bn at the same time last year.
  • Overseas investors continued to have the largest share of investment, nearly half, spending £4.03bn.
  • Total UK property investment for 2012 to date is £25.34bn, up on Q1-Q3 2011.

Capital flowing into UK property continued to hold up in Q3 2012, despite global uncertainty and fears that the market would be very quiet during the London Olympics.

The £8.51bn invested was less than the £8.96bn in Q2, but up from £7.16bn in Q3 2011. So far this year, investors have spent £25.34bn, slightly up on Q1-Q3 last year – which is probably better than many agents had feared earlier in the year.

Overseas investors took the largest share of Q3 investment, at 47.5% (£4.03bn), and account for 49.5% of the total for the year to date (£12.55bn out of £25.34bn), continuing a trend started in Q4 2011. Far Eastern buyers took the largest share, at £1.05bn, followed by Scandinavians, at £0.93bn, boosted by Norges Bank Investment Managements’ purchase of a 50% stake in the Meadowhall shopping centre, Sheffield.

Overseas investors were also the only net investors for Q3 2012, spending £1.89bn, and have spent £6bn in the year to date, making it 15 consecutive quarters of net investment in the UK, reflecting the UK’s perceived safe haven status since Q1 2009. US investors are the leading overseas buyers so far this year, with 36.9% (£4.21bn) of all acquisitions, followed by Far Eastern buyers (£1.86bn), then Middle Eastern investors (£1.84bn).

Overseas investors also had the largest share of disposals, at 25.2% (£2.14bn), followed by UK institutions, at 21.9% (£1.86bn). Irish investors, which have sold a net £7.6bn of property since the crisis started, remained the main overseas sellers in Q3, at 31.3%, followed by Germans, often to meet fund redemptions. UK listed property companies were the most significant net disinvestors, led by London & Stamford’s sale of its 50% stake in Meadowhall and Hammerson’s sale of London office assets.

overseas 1

overseas 2

overseas 3

Generally offices remain the favourite sector for purchase and central London the dominant location at 41% (£3.47bn), but UK institutions are more interested in buying in the retail sector. The average lot size was £33m, a jump from the £24.6m long-term average since Q1 2007. The rise in initial yields, from 7.29% to 7.45%, slowed, so stabilisation may be near.