August 07, 2012
The Edge: London properties pique interest
|London properties pique interest
In The Edge Financial Daily Today 2012
Written by Ho Ching Ling
Tuesday, 07 August 2012 11:30
KUALA LUMPUR: London properties have always been popular among wealthy Malaysians. But recently, institutional funds and corporates have joined the fray, investing in real estate in Central London, a trend which analysts and real estate advisers expect to continue.
Since the early 2000s, individual Asian investors have invaded the London property market, and this includes high net worth Malaysian individuals. It was reported last year that Asian buyers alone made up 60% of new-build properties bought in Central London.
Later on, foreign sovereign wealth funds and pension funds, including our own Employees Provident Fund (EPF), began to enter the market and have become Central London’s largest foreign buyers since 2009.
Data from international real estate adviser CB Richard Ellis (CBRE) revealed that the EPF was the fourth largest foreign buyer in Central London, investing around £796 million from 2009 to 2011 just behind South Korea’s National Pension Service, Canada’s CPP Investment Board and American-based Blackstone Group.
“Prime properties in London have traditionally proven attractive to more risk-averse investors, such as pension funds, due to the security of investment, developed legal system, and attractive returns,” said Nabeel Hussain, vice-president of CBRE Malaysia research and consultancy.
Malaysian corporates have also recently jumped on the bandwagon with a slew of companies announcing property acquisitions in Central London in the past year, some of them first-time investors in the region.
CBRE data reveals Malaysian investors have already transacted up to £2 billion in Central London offices since 2010, primarily boosted by the recent purchase of the Battersea Power Station site by S P Setia Bhd and Sime Darby Property Bhd.
“It is possible that the recent investment activity by Malaysian companies in the UK will act as a catalyst for further investment, especially as the UK property market is a mature, established market and typically considered a safe haven for foreign capital,” said Nabeel.
Just last week, IJM Land Bhd announced that it was entering into a joint venture (JV) to acquire and develop a 1.09ha site in Central London. It intends to develop a five-star hotel and residential apartments on the site, with an expected gross development value (GDV) of £280 million (RM1.36 billion).
Amcorp Properties Bhd, which has been active in the London real estate market, added another trophy last week by entering into a JV to purchase a freehold, income-producing property in central London for £85 million. Amcorp will invest up to £23.25 million for partial ownership of the property, which will be redeveloped.
Earlier this year Eastern & Oriental Bhd announced its acquisition of the prime freehold office and retail building Princes House in Central London for £20.25 million.
Another new Malaysian player set to enter the market is Lembaga Tabung Haji, which is in the process of finalising its first commercial property acquisition in London, a deal which is expected to be worth some £165 million.
“It’s possible we will see more of these kinds of investments. The property market, especially in Central London, is an interesting and attractive one since it’s a matured and developed market,” said an analyst at RHB Research.