An influx of overseas buyers is boosting the prime London property market as they seek to escape the eurozone crisis and acquire assets while exchange rates remain favourable.
The number of £10m-plus houses sold in London has risen by more than 500 per cent since July, with foreign buyers accounting for 56 per cent of those purchases, according to the November Prime Central London Index from Knight Frank.
The number of Italian buyers was up 41 per cent compared with a year ago, with Spanish buyers up by 40 per cent and French buyers up 35 per cent. Chinese buyers increased the most – up 52 per cent on last year.
“Feedback from the market confirms that the safe haven role played by central London property is still being recognised by international purchasers,” said Liam Bailey, head of residential research at Knight Frank.
He pointed out that the view taken by many new entrants to the market is that London property is a strong defensive option. Concerns have grown over the weakness of many eurozone economies, while the pound has not strengthened significantly against the euro.
“Despite recent price growth in central London, eurozone- and dollar-based buyers are still able to achieve an effective discount of 14 per cent and 26 per cent respectively due to currency movements on March 2008 prices in London,” Bailey said.
Andrew Ellinas, director of Sandfords, agrees. “We have seen a surge of interest in property in prime central London as a result of the eurozone crisis, with 60 per cent of properties sold over the past month in London W1 going to cash-rich Europeans.
“These buyers from France, Italy, Germany and Spain in particular, are keen to move some of their wealth into London prime property, which is expected to perform strongly over the long term.”
Outside Europe, there is still strong demand from buyers in the Asia-Pacific region. Property prices have risen 30-50 per cent in Hong Kong, Singapore and other Asian centres in the past year, and buyers appear keen to take advantage of the weak pound by moving money out of “hot” markets in Asia.
Other brokers also report rising interest from overseas buyers. “Looking at the last 50 sales in October and November from our Kensington, Knightsbridge, Mayfair, Chelsea and Westminster offices, just 24 are British,” said David Adams, head of residential sales at Chesterton Humberts.
He said Indians represented the second largest foreign group of buyers in this sector. “The Russians are back with a vengeance,” he added. “Europeans are a dwindling contingent, with two French buyers and one each from the Netherlands, Austria, Greece and Spain.”
However, Peter Mackie, managing director of Property Vision, part of HSBC private bank, warned that there are risks in playing the currency market when buying property. “Sensible buyers are those who have always wanted to buy in the UK and are taking the chance to do it now while they can get a quality property for less,” he said. “But buyers should be aware that they could be exposed to currency risks, particularly if they are converting their money in stages to make their repayments.”
The influx of international buyers has pushed up prices across London. Central London prices rose 0.9 per cent in November according to the Knight Frank report – the first rise since June 2010. This reverses almost all the price declines seen between July and October 2010.