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London Disappears From List of 10 Best European Cities for Property Investment

High prices and reduced yields have caused London to fall from the top 10 best European cities to invest in property. It currently sits at 15, the first time London has not been in the top 10 since 2012.

The Emerging Trends in Real Estate report, which was compiled by the Urban Land Institute and PwC, placed Berlin and Hamburg in the top two spots, while Birmingham ranked at number six.

The report was based on interviews with over 500 property managers, developers, and investors in Europe. They rated each city based on investment viability and their own impressions of the future residential and commercial property market.

Although it remains the largest investment market for European property, the list places London one position below Istanbul and two beneath Budapest.

ULI Europe chief executive Lisette van Doom said that Istanbul had a rapidly expanding population, creating huge opportunities for investors.

This report indicated that prices may have finally peaked, leaving investors ready to call the market. Some of them predict that UK capital’s yield compression is either ending or likely to end this year. Most investors, however, recommend it as the ideal solution for those who want to keep their money secure.

Gareth Lewis, PwC Real Estate director, confirmed that London remains the biggest real estate prospect in Europe. He stated that during hard times, investors want a safe haven for their wealth, and as yields compress and prices increase, those seeking more lucrative opportunities will check out other cities.

Mr Lewis explained that this is why London has fallen out of the top 10.

“It’s just a reflection of where we are in the cycle.”

One investor commented that ‘smart Americans’ are setting their sights on mainland Europe for their 2016 investing activity. They said that the main test for London is how much of this stock is going to be taken up.

Birmingham occupied six place for the second year in a row because it is relatively cheap compared to London, and companies are starting to establish a presence there, such as HSBC. One investor commented that Birmingham also attracts people because rents are cheaper.

Berlin remains popular because it is a hub for tech and creative industries, which creates an ongoing demand for offices. One international investor explained that the city has a multitude of tenant types, thanks to its lower cost of living and young international employee population.

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Paris, which remains Europe’s third most active property market, came in 22nd. Investors referred to the city as too expensive and politically unstable.

According to the report, privately rented flats and other types of residential property are being regarded as a major area of future investment opportunity in London. Ms van Doorn said that as a class, residential is going mainstream, with special emphasis on retirement housing and student accommodation.

Another theme in the report is the growing importance of the environment and sustainability. Urban Land Institute representative Peter Walker said that this feature is no longer a fad- it has become an essential business theme for many investors.

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