Photo credit: John Leach
Moscow has replaced London as the best city in Europe for real estate investment, according to a new report.
The annual European Regional Economic Growth Index (E-REGI) from LaSalle Investment Management saw Russia's capital take the top spot from the UK city, which fell down to second place.
The index found that a reversal of growth and employment in the UK from 2010 affected London's ranking, in addition to wider financial worries. Moscow's real estate, on the other hand, rose because of its potential for growth.
Indeed, Russia's property market is fast recovering from the crisis, with house prices on the way up to levels last seen in 2008. The average price of Moscow property per square metre jumped from £572 in 2003 to £3,240 in August this year, according to The Telegraph .
Across the city, there has been a housing shortfall, reports one Russian estate agent, but construction is now increasing. In July, building activity surged by 17.8 per cent year-on-year following months of abandoned investments. After climbing from tenth to second in last year's E-REGI, Moscow's market is certainly looking impressive.
And yet London is faring well too. Prime property prices and rents have been reaching record highs in recent months, with a further 0.7 per cent increase in October. According to estate agent Knight Frank, values are now 5 per cent higher than at the 2008 peak.
"Our analysis of market activity in the three-month period to October, compared to the same period in 2011, confirms that sales being agreed are up by 12 per cent over the past year," Head of Residential Research Liam Bailey commented.
"The only impact from recent European and global financial and economic market turmoil has been to push more buyers into the central London market," added Bailey. Russian investors are a big part of that overseas interest. In fact, Russia's election next year "has already spurred increased activity" in London real estate from investors, as political issues drive overseas buyers into the UK.
Commercial property demand is starting to recover, too, as London office take-up rose to 2.7 metres sq ft in the third quarter of 2011, according to Property Talk Live . The latest report from CB Richard Ellis revealed that although this take-up is still lower than the 2.9m sq ft average of the past 10 years, the recent increase indicates a positive move in the market.
Turkey's capital also provides sturdy competition for Moscow, echoing Russia's improvement last year by surging from 25th to fifth in the E-REGI chart. Istanbul sits alongside Russia as a sizeable emerging economy, quickly establishing itself as a regional financial centre, while the rest of the country is also seeing the benefits of exceptionally high growth.
Even with Turkey's booming economy, though, LaSalle's report admits that London is the strongest contender for the top spot. LaSalle's European CEO Simon Marrison said: "Despite losing its top spot, London is a mature, dynamic and resilient economy which continues to set the pace for the rest of Western Europe."
As prices, demand and construction are forecast to keep on rising in both Russia and London, the two European cities will be looking ahead to next year's LaSalle index with confidence. And with the 2012 Olympics on the way to boost England's economy, London may well feel it has a sporting chance in reclaiming that gold medal.
The top 10 E-REGI rankings for 2011 are as follows:
9. Copenhagen / Oresund
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