Investment in the UK Real Estate Market
By Alan A. Samson and Richard Wilkinson
Relative to other classes of investment, real estate in the UK remains strong and continues to outperform equities. At the end of 2001, unleveraged returns were circa 7%. As equity markets continue their decline and interest rates remain low, the UK real estate market remains a sound and popular destination for U.S.investment.
Contributing factors:
London's position as Europe's premier financial centre
High levels of liquidity
Strict planning controls and building standards which help minimize the risks of falling capital values
Relatively low taxation and the exemption of foreign investors from capital gains tax
Institutional, long-term (15 years +) leases which favour landlords, incorporating upward only rent reviews
Low interest rates, currently 4%
In 2001, foreign investment in UK real estate amounted to £5.7 billion, representing almost 20% of total investment. A recent report determined that US investment in UK real estate dominates, accounting for £2.3 billion or 40%, followed by Ireland, the United Arab Emirates, Australia and Germany.1 U.S. opportunity funds recently active in the UK market include AEW Capital Management, Apollo International Real Estate Fund, Blackstone Group, GE Capital Real Estate, J E Robert, Doughty Hanson, Lehman...
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