By an overwhelming margin, investors chose London as the world’s top commercial property market, according to an annual survey by Washington D.C.-based Association of Foreign Investors in Real Estate.

London moved past Washington D.C. and New York, with Paris and Tokyo rounding out the top five. In the 2009 survey, London was second, in a virtual dead heat with New York and Washington, but this year respondents chose London by a wide gap, the association reports.

Fifty-one percent identified the U.S. as the best opportunity for capital appreciation, compared to 37 percent in 2008 and 26 percent in 2007. Two-thirds of respondents said they planned to increase their U.S. investments in 2010.

The annual survey reflects the responses of 200 AFIRE members, who control more than $842 billion in real estate.

Although 2010 will be a “boom year” for property investment in the U.K., it could lead to sharp declines by 2012, consultancy King Sturge warns in its latest report.

“There are clear signs the property investment market has started to recover,” the firm reports. But a wide variety of economic factors could create a “false dawn” and the “collapse” of capital values by 2012, King Sturge forecasts.

“All commercial occupational markets across Europe will remain soft” for two to five years and “rents will continue to fall,” the firms predicts. “In the office market the worst rental falls will be in Germany, Ireland and Spain,” King Sturge writes. “In the industrial market Spain and Hungary will do particularly badly.”

Headlines from the world of property:

U.K.: Commercial Loans Dry Up

Billions in troubled loans has lenders wary. (Financial Times)

Telstra to Float Chinese Real Estate Portal

The Australian company plans a public offering for SouFun. (The Australian)

U.S. Retirees Revive Mexcian Market

Latin American portal sees uptick in inquiries. (OPP, free registration required)

While commercial markets around the world show signs of stabilizing, evidence is mounting that the worst is still ahead for the United States.

Commercial property values in the U.S. are already down more than 40 percent since 2009, according to Moody’s Investor Services. And Goldman Sachs predicts commercial prices could fall another 17 percent through the fourth quarter of next year.