London has dropped out of the 10 best cities for property investment in 2015, while Birmingham retained its sixth spot, a report by PwC and Urban Land Institute revealed today.
The Capital, placed 15th, was overtaken by cities such as Budapest and Istanbul, with rising values and squeezed yields having dampened some of its property investment appeal, according to over 500 European real estate developers and brokers surveyed by the report’s authors.
However, London is still the largest real estate market in Europe by a large margin, the paper noted, and the latest rankings are “just a reflection of where we are in the cycle”.
“Money tends to plough into it during the harder times, as people are looking for a safe bet, somewhere to keep their money, and as prices go up and yields compress, people looking for better rewards will look to secondary cities,” said Gareth Lewis, the director of Real Estate at PwC. “And that’s when you see cities like London slide out of the top 10. It’s not a long-term damning of the London market by any stretch of the imagination.”
Birmingham was placed sixth for a second year in a row, with focus on the city being chosen to house key centres for huge companies such as HSBC and HS2.
“I think it is finally proven that Birmingham is attracting employees and employers from London,” one investor quoted by the report said. “At several buildings in Birmingham which we own, the tenants have moved people there because it is cheaper.”
The best European city for property investment for 2015 is Berlin, due to its popularity as a hub for creative and tech industries, and the strong demand for office space.
However, Lisette van Doorn, chief executive at ULI Europe, chose to highlight the growing momentum for residential property investment in general.
“We see almost all types of players getting involved, if they are not already, in residential. That is not only in the UK, but across Europe,” van Doorn said. “I think residential is becoming really mainstream as a class, all of it – including retirement living, student housing.”