Overseas investors should steer away from buying prime, trophy buildings in the UK and instead focus on more stable, operational assets, says George W Bush’s former economic adviser.
Pippa Malmgren, founder of London-based economic advisory firm DRPM and former head of global investment strategy at UBS Warburg, now advises a number of sovereign wealth funds. She was previously a special adviser on global financial markets in the Bush administration and was responsible for briefing the president on major issues including Enron and 9/11.
She said her sovereign and pension fund clients had been keen to bolster their investment in inflation-protected assets since the start of quantitative easing and had set their sights on the UK.
“These investors are now looking primarily at property with genuine, unimpaired cash flows. They are less interested in trophy buildings like the Shard and more in rough, useful, real economy properties. Buildings for which there is a genuine need are attractive to foreign investors now. It is why the Chinese have invested £700m in Manchester Airport. The interest is huge.”
She added that overseas interest in UK property was also being fuelled by rising inflation and unrest in emerging markets and by the fact that the UK now offered the best tax treatment for foreign investment, since Switzerland and Singapore had both “effectively closed down for new money”.
On the subject of the general election, Malmgren said the British leadership should permit foreigners to deploy more capital to fund UK infrastructure.
“There is so much debate over big projects like HS2 and what the government can or cannot do because of limited infrastructure spend. But why do you have to spend any money on it at all? Every foreign investor in the world is dying to spend their money on it.”
