Overseas home buyers boost prices in London

International buyers are taking a rapidly growing share of the market for central London homes.

The proportion of sales to overseas buyers rose from 25 per cent in 2004 to almost 40 per cent in 2005, driven by rising sales to Asian and European buyers, according to new data from the Royal Institution of Chartered Surveyors (RICS).

Property analysts feared the bombings last July by Islamic terrorists could have an impact on the image of city, but the market seems to be picking up.

James Thomas, head of residential at Jones Lang LaSalle, the agents representing 199 Knightsbridge, one of the most expensive developments in the capital, predicts that central London will outperform the rest of the UK this year.

“The prime central London markets are very much seen as a safe investment haven for the international purchasers,” says Mr Thomas. “And the performance of the financial markets had significantly increased the wealth of the wealthy and this again is being pushed into the prime [property] markets.”

The typical buyers of the best homes in the city have been from the Middle East or Russia, on the back of high energy prices. But they will soon be joined by more Indian and Chinese, according to forecasts by agents Knight Frank.

The most expensive house in London was bought by Lakshmi Mittal, the wealthy Indian, who paid £60m ($105m, €87m) for a place in Kensington Palace Gardens.

Kerri Sibson, sales director for 199 Knightsbridge, said buyers had come from countries as diverse as France, Germany, the US, Thailand, Australia and South Africa.

The central London housing market is largely cocooned from the rest of the UK because of a host of local factors such as bonuses in the City of London.

Many of the most upmarket areas, such as Kensington, Mayfair and Chelsea, have endured an indifferent market in recent years, with prices falling in 2003 and only rising slightly since.

These upmarket areas experienced big price rises in prices in the late 90s, as the first parts of Britain to emerge from the Thatcher recession.

For the rest of the country, the boom came much later, and only petered out last year.

Many property experts say the time has come for central London prices to take off again. Unlike towns and cities elsewhere in the UK, the market is not so dependent on interest rates or personal debt levels, given the wealth of many buyers.

“We expect house prices in London to show moderate increases over the next few years despite continued concerns over the high level of prices compared to incomes,” says Milan Khatri, chief economist at RICS.

The new confidence in the top end of the market is reinforced by ambitious plans for London’s most extravagant block of flats which last week gained planning permission.

A consortium of investors, advised by Candy & Candy, the designers, will build 86 apartments costing up to £20m each on a Knightsbridge site overlooking Hyde Park.

Nick and Christian Candy, two brothers in their early 30s, have made a name for themselves as the development managers of luxury flats, planes and yachts for international billionaires.

The flats at Bowater House, designed by Lord Rogers of Riverside, will be decorated ostentatiously with expensive marble, crystal and exotic woods. “The finish is second to none,” says Nick Candy.

They will also have security features such as panic rooms, bullet-proof CCTV cameras and direct lift access from the underground car park to each apartment.

Until recently there was only a handful of flats above the £10m mark in the capital, but this has changed with a spate of new developments, many bigger than traditional London house at up to 10,000 sq ft each.

Mr Candy insists that there are plenty of people willing to spend £20m on a single apartment.

The Candy brothers have carried out a handful of projects, one of which – 21 Manresa Road in Chelsea – now boasts the world’s most expensive flat, at £27m.

Elsewhere, the two most expensive flats at 199 Knightsbridge, a development of 200 apartments by Hong Kong developer Sammy Lee, have sold for £20m.

199 Knightsbridge is operated by the Hiatt hotel chain while Bowater House will be run by the Mandarin Oriental hotel chain.

Yolande Barnes, research director at Savills, the estate agent, said the group’s forecasts for the prime central London market of 5 per cent could prove conservative.

Properties over £6m were likely to jump by 10 per cent in the first quarter, she said. “The market is looking buoyant, particularly at the extremely high end, with high buyer activity and shortage of stock coming on to the market, for now at least.”