London property no longer looks so safe

Those who parked money in London property as a safe haven may now find it doesn't stack up as well against alternatives.

Benchmark Spanish and Italian 10-year bond yields are trading above 5 and 4 percent, but without the same perceived risk of euro zone breakup that sent them soaring last year.

Property has the disadvantages of being a much less liquid market with things like higher transaction fees, building maintenance costs and gaps in rental to worry about.

ESCAPE TO THE COUNTRY

For specialist property investors, London is also looking pricy compared to the rest of Britain.

Outside London and the Southeast, office values have dropped 14 percent since June 2009 , according to property consultant CBRE.

The gap in yield between West End London offices and so-called secondary British offices is about 10 percent versus 1 to 2 percent before the crash of 2007.

Property company share prices show London's premium too.

London specialists Derwent London, Great Portland and Shaftesbury trade at premiums to net asset value forecasts of about 14 percent, 8 percent and 11 percent respectively, according to Investec figures.

By contrast, the two largest property firms with real estate outside London - Land Securities and British Land - trade at about a 6 percent discount and a 5 percent discount to their last stated net

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