London has overtaken New York to become the world’s leading global destination for overseas property investment for the first time in five years.

Members of the Association of Foreign Investors in Real Estate (Afire), estimated to hold around $2 trillion in property assets globally, named the UK capital as their favoured destination for the first time since 2009, the only one of the top five out of the US.

Despite some early warning signs of a supply glut approaching in London and the government’s decision to levy capital gains tax on overseas property owners, demand for property in the city remains undimmed.

London was voted top of the annual survey, now in its 22nd year, by 24% of members. It was followed New York with 21%, followed by San Francisco, Houston and Los Angeles.  

In a sign of the continuing turn-around in expectations for the British housing market, the UK went from being unplaced last year to being voted the third best location for capital appreciation.

Spain, tied with Australia and Mexico as the fifth top global destination for capital appreciation in 2012, was second, with the US remaining top for the second consecutive year.

‘While the US remains the primary target for foreign investment, 69% of survey respondents projected they would also have modest to major net increases in their European portfolio,’ said Afire chief executive James Fetgatter.

‘The US leads the rankings for planned real estate acquisitions in 2014 with 48% of respondents projecting a modest increase in their U.S. portfolio size and 20% projecting a major increase. No respondents projected a major net decrease.’