Capital Of The World 's Fifth Largest Economy Essay

Capital Of The World 's Fifth Largest Economy Essay

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As a city, London forms the capital of the world’s fifth largest economy (The World Bank, 2016). Dating from Roman times, it is described as one of only a handful of global centres, matched by cities such as New York and Tokyo. Greater London is home to 8.61 million people (London Datastore, 2016), with much of Britain’s administration and government located within its limits. Once the largest port in the world and a major manufacturing hub, finance has always played an import part in London’s economy due to Britain’s significance as a trading nation. London’s current economy can be seen to have evolved from the three areas of trade, administration and leisure. International finance has taken the place of manufacturing, with particular market focus in equities, commodities and insurance (Encyclopaedia Britanica, 2016). Noted as the best place to do business In Europe, and also as a destination, London possesses great attraction to foreign visitors, London Assembly (2016) acknowledges that almost 25 million people visit the city each year and that 110,000 international students study at its academic institutions.
Over the last ten to fifteen years, what can only be described as extensive growth has occurred in London property values. In January 2016, the average house price in the capital was £551,000 compared to £292,000 for the UK as a whole (Office for National Statistics, 2016). Such prices have been achieved through a 9.8% ten year growth average (Knight Frank , 2014). With such substantial price increases, the attractiveness of the city to foreign investors is clear. As a result, London is the obvious case study when looking at foreign investment into the UK property market.
This paper will explore issues of finance, prope...

... middle of paper ...

...ome alternative for investors based in unstable countries. Secondly, it notes that London has seen consistent growth in its property market over the long term, with the last 10-15 years marking especially strong growth. As a result, London is determined to be currently experiencing housing bubble conditions, with year on year house prices that risk being unsustainable over time. To conclude, and perhaps most importantly, this paper breaks down the homogeneous ‘foreign investor’ into individuals, corporations and funds spanning the world. The paper concludes that such investors are motivated by three fundamental considerations; capital growth (making money through increasing values); political and economic stability (London offering a stable economy for them to invest their wealth); and, lastly, London’s unquantifiable values of history, culture and entertainment.

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