London’s status as a top ranked investment location has been damaged by uncertainties in the property sector and fears over an economic downturn.

The capital city fell to fifteenth place for investment prospects and thirteenth for development in the latest Emerging Trends Survey from the Urban Land Institute and PriceWaterhouseCoopers.

But the survey, presented at MIPIM, revealed that Moscow and Istanbul were rated as the top two cities, according to 485 industry professionals which took part in the research.

Germany also emerged as a popular market with Frankfurt - historically in the bottom ten ranking rankings leapt to seventh - joining three other German cities (Hamburg, Munich and Berlin). Lyon, in France, also made it to top sixth for investment and fifth for development.

London, which was ranked second for investment and fourth for development in 2007, was impacted by concerns over its exposure to the financial markets and the UK economic climate.

John Forbes, head of UK real estate at PriceWaterhouseCoopers, told Property Week, ‘The main reason that interviewees cited concerns about London was due to its dependence on the financial services sector.

‘A change in sentiment will depend hugely on what happens in financial services but if anything the mood has become more pessimistic since interviews were conducted.'

The report said that enthusiasm for established European markets had subsided as investors expressed caution for ‘Old Europe’, in preference for new markets.

‘It is not really surprising that Moscow and Istanbul were top picks because what’s happened is that the bullish sentiment has continued in Moscow and St Petersburg and enthusiasm has dropped everywhere else so it’s relative.

‘Turkey and Russia are predicted to have highest GDP growth in Europe this year so economic fundamentals are sound. These markets have been immune from the negative sentiments which have impacted others.’