Wealthy foreign buyers seeking safe haven assets in city’s prime real estate spots
Luxury home prices in central London have soared 40 percent since March as wealthy overseas buyers seek a haven from political unrest and the sovereign debt crisis, Knight Frank said.
Values of houses and apartments costing an average of £3.7m ($5.9m) rose by an average of 12.5 percent in October from a year earlier, the London broker said, bolstered in part by Arab buyers.
“Looking ahead, there is a strong likelihood that geo-political issues will continue to push overseas buyers into London, especially at the top end of the market,” the report said.
“The ramifications of the Arab Spring are still not fully played out – buyers from this region are still looking to invest in London.”
The weakness of the pound coupled with fears of a European recession helped push the value of London’s prime residential properties to a record in October. But Knight Frank expects an increase of only five percent next year and little change in 2013.
“We’re entering a much slower stage of price growth,” Liam Bailey, head of residential research at the company, told Bloomberg.
“We can’t see how you can have double-digit growth for three years on the trot.”
Buyers are also competing for a shrinking number of properties, with the number of luxury homes on the market falling by 14 percent in the past 2 months, the report said.
The declining supply of prime properties is encouraging developers to convert commercial buildings to homes in expensive areas such as the West End, where most of the offices were originally residential real estate.
London property has long been seen as a safe haven for investment for wealthy GCC investors. Real estate consultancy Savills in June said MENA homeowners hold 13 percent of London’s most expensive property by value with an average spend of £4m.
Harrods Estates, the property arm of the Qatar-owned department store, in August said a Middle Eastern businessman had signed a lease to rent London’s most expensive property at a cost of £55,000 ($90,000) a week.
The company said it had seen the average cost of its rented property increase to £4,285 from March to date compared to £1,955 the same period the previous year.
Luxury development One Hyde Park, which was launched to great fanfare in January, broke world records for the most expensive price per square foot at £6,000.
Buyers in the luxurious development, which includes 86 apartments overlooking either Hyde Park or Harvey Nichols, are said to include Qatar’s Sheikh Hamad Bin Jasim Jaber Al-Thani and Mohammed Saud Sultan Al Qasimi, head of finance for the government of Sharjah.
Between 20-25 percent of sales were to Middle East buyers, with the cheapest apartment in the development costing £5.75m ($9.2m), Arabian Business reported in June.