London has lost its crown as the property capital of the world to New York following a turbulent year that saw investment in the UK capital plummet.

Global property investment edged up 0.5% to $1.35tn in the year to June, but investment in London fell from $39bn to $25bn because of the EU referendum and high prices, according to Cushman & Wakefield research.

The city slipped to third in the list of cities attracting the most money, behind New York in first and Los Angeles in second.

London remained the top city for investment in the EMEA region, and Cushman & Wakefield predicted its drop in the ranking could be “short-term”, with relative pricing already starting to look more attractive. 

“In the medium term, the net impact on London could be limited if the city succeeds again in innovating and embracing change – it could even increase its leading international role if it develops a yet more global face to the world,” the firm said in its Winning in Growth Cities report.

However, it warned that other cities would look to “take advantage” of Brexit vote uncertainty to attract occupiers away from London.

The capital was not the only loser: a range of other gateway markets were also down, including Tokyo, Washington and Frankfurt, due to a combination of limited supply and local competition.

“Looking ahead, the scale of changes underway in the macro environment – from a slowdown in China, to Brexit, to the US elections – has meant many investors are struggling to decide where they should look for value,” the report said.

The US was the fastest growing country in terms of investment with 15 of the top 25 cities. Four European cities – London, Paris, Berlin and Amsterdam – made the list alongside five in the Asia-Pacific.

Europe remained the most attractive region for foreign investment with 10 of the top 25 cities for attracting overseas cash.

David Hutchings, head of EMEA investment strategy, Cushman & Wakefield, and author of the report, said: “Despite the volatile environment, more investors are turning to the stable cash flow and inflation-hedging merits of real estate, particularly given that the fundamentals of the market on the occupier side are holding up well.

“The greater appeal of the US clearly comes out through the data, with its cities dominating in all sectors, and New York top for overall investment and for cross border buyers. However, EMEA’s enduring attractiveness is reflected in having the most cities attracting foreign investment.”

Investors will remain cautious

Carlo Barel di Sant’Albano, chief executive of global capital markets at Cushman & Wakefield, said: “While global uncertainty will continue to make investors more cautious, this is counterbalanced by the fact that corporate confidence has held up.

“Allied to the changes in demand being wrought by new technology, living and working practices, this underpins a robust medium-term outlook for good quality real estate.

“Looking ahead, we remain positive about investors’ interest in allocating capital to real estate.”