Foreign direct investment in the UK real estate market

The aim of this paper is to identify the key factors affecting foreign real estate investment (FREI) in the UK, with a particular focus in London. The panel regression method was used as a data analysis approach for this paper. Two panel regression equations were developed. Equation 1 has five explanatory variables including GDP, wage, property price, land price and interest rate. Equation 2 has the sixth explanatory variable, tourists, as well as the five variables used in Equation 1. Pearson coefficient analysis was also conducted to identify the correlation between the dependent variable, FREI and the explanatory variables. For equation 1 of panel regression analysis showed all five explanatory variables are statistically significant and have an expected impact on FREI. That is GDP and house price, have positive impacts on FREI, while wage, land price and interest rate have negative impacts. For equation 2, all explanatory variables, apart from interest rate and tourists, are statistically significant. Tourists have an unexpected negative impact on FREI. Pearson coefficient analysis showed that FREI has a statistically significant correlation relationship with GDP, wage, house price, land price and interest rate. FREI also has a positive relationship with all explanatory variables except interest rate.