UK - The number of foreign investors investing in UK property is likely to drop in the short-term as the economic turmoil has made investors more cautious and selective, according to experts at the latest IPD/IPF Property Conference.
Issues of liquidity, transparency, tax and foreign exchange risk are deterring foreign investors from investing in UK real estate and encouraging them to focus more on their domestic property markets, said Alan Patterson, head of European research and strategy for AXA Real Estate Investment Managers.
"People are retreating to their own domestic markets. They do not see much advantage of going into foreign markets and enduring all those additional risks and costs," said Patterson.
While the change is only a minor one at this stage, data from DTZ also suggested between 2004 and 2007 31% of incoming capital into the UK came from foreign investment, while for the first and third quarters of 2008 only 28% came from overseas investments.
That said, this figure is expected to decline further as investors retreat to their domestic markets.
"In the short term, German open-ended funds are more likely to be selling than buying, while sovereign wealth funds are reviewing their strategies and becoming more selective," noted Patterson.
There were suggestions, however, that 2009 will be the year for opportunistic funds to take advantage of the UK market and buy distressed sales while in 2010 core UK property would be a bought based on its yield.
Analysts predicted the credit crunch would also slow down the pace of globalisation within real estate, as financial markets will take fewer risks and become more restricted.
"Financial markets will become more local. People feel more safe in their back yard," said Neil Cable, head of European real estate at Fidelity International.
Cable insisted "complexity is out and simplicity is in", as investors will be looking for less "innovation".
Greater political control will also have an impact on real estate investment, he argued.
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