By ANSHUMAN MAGAZINE, CMD

CBRE South Asia Pvt. Ltd.

Central London saw heightened activity in land acquisitions from overseas purchasers, accounting for 53% of take-up in Q2 2014, according to latest research by CBRE. This is in contrast toabout 50% of overseas investment a year ago. A large proportion of overseas investment continued to flow-in from Asia (42%); while there was a marked increase in interest from Indian investors. Indian investment actually accounted for £241million, translating to 55% of overseas investment in Q2 2014, in contrast to Q2 2013 when no land was purchased by Indian investors in this market.

Land purchases in London increased by 13% over the second quarter to reach £828million. This figure brings the total for the first half of the year to £1.6billion, level with the same period last year, with Indian investors acquiring large lots for residential conversions. India Bulls purchased 22 Hanover Square, representing about £155million, the largest transaction in the second quarter. This purchase closely followed the acquisition of New Court on Carey Street by Lodha for £90million in Q1 2014, and that of 1/3 Grosvenor Square for £306million in Q4 2013. Both schemes are due to be converted into housing developments; with the Carey Street scheme set to deliver 148 new apartments.

Overseas investors, especially those from India, displayed a strong interest in development opportunities in Central London during Q2 2014, supported by strong market fundamentals and the recovering UK economy. With the recent announcement by the Office for National Statistics, which declared that the UK economy had grown by 0.8% for the quarter—the fifth consecutive quarter of positive growth—the strength of the recovery was further underlined.This considerable interest in residential conversion opportunities shown by Indian investors has mainly been due to the greater return on value in this market. With London’s real estate market having been a fairly stable investment destination, this particular trend would indicate that Indian HNIs, leading corporate houses and local NRIs in the UK have taken advantage of a good investment opportunity where realty prices have bottomed out, and an imminent economic recovery is on the horizon.

As a result of this reported growth in the UK economy, investor appetite for development opportunities—including for housing—is expected to remain strong, going forward. There has been continued growth in the London residential market since the financial crisis; and strong demand for residential-led land sales has caused demand to spill out into markets such as Southbank and West London. The recovery in the leasing markets should result in increasing commercial land transactions in the second half of the year.