Property investors to add further pressure to prices

 A flood of property investment in Britain this year will push up prices even further as investors seek a safe haven for their cash, according to a survey of top property bosses.

“Big-Four” consultancy firm EY described the UK as “leagues above” the rest of Europe in terms of the quality of residential and commerical property investment. Its survey, which includes the opinions of Robert Noel, the chief executive of Land Securites, and Guillaume Cassou, European head of real estate at private equity firm KKR, showed 69pc of real estate chiefs believed Britain would see the highest deal volumes this year. Spain was a distant second with 16pc of the vote, while Germany was judged to be the third most attractive place to invest.

Dean Hodcroft, head of EY’s UK and Ireland real estate division, described London as a “magnet for world talent” that benefited from geographical advantages, political stability and market transparency, placing it above other global cities such as New York.

“It’s a big draw if you’re on London time and dealing with Los Angeles on the one hand and New Zealand and Australia on the other,” said Mr Hodcroft. “You’re pretty much perfectly placed to be able to do business still within relatively social business hours. That’s totally different to the East Coast of the United States.

Spain has seen a surge in investment in recent months. Last October, Microsoft founder Bill Gates became the second-largest shareholder in FCC, a Spanish builder hit hard by the collapse of the property market.

Mr Hodcroft said investors were also starting to snap up properties in Greece.

“A year ago nobody had the slightest interest in Spain and definitely not in Greece,” he said. “[Now] hedge funds are all looking around for a bargain because there’s no point investing in shiny office buildings in London because it won’t deliver them the sort of returns promised to their investors.”

However, Mr Hodcroft said he believed it was still too early to begin investing in these countries.” If you’re a commercial property investor and you’re looking for real opportunities right now, it’s limited in Europe because things are still overpriced relative to the real market value of the assets mainly because a lot of those assets are under the control of the banks.

“Banks are highly reluctant to mark those assets down to what their real value is. If they did that they’d have problems across their balance sheet. They’d be bust in many instances.”

Mr Hodcroft said these factors all contributed to the continued rise in London property prices. Last week, official figures showed the average price of a London home increased by £63,000 in the year to February, which is more than twice the average income. PwC believes the average price of a home in the capital could reach half a million pounds before the end of the year.

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