International buyers driving up prices
Assets worth millions, in the city's prime neighbourhoods, are being snapped up
An increasing number of international property buyers in central London, many from the Middle East, are driving up prices in the city's most sought-after neighbourhoods.
International buyers now account for more than 50 per cent of purchases in central London. Eighty per cent of the properties sold for more than £10 million (Dh59.3m) last year were bought by overseas citizens, the property company Savills says.
"London is seen as a safe haven," says Lucian Cook, a Savills research director. "It is a relatively stable economic and political situation."
Most foreign buyers in the higher price ranges are from Russia and the Middle East, Savills says.
After a lull in 2009, Middle East buyers have been growing more active in the city, industry executives.
"With oil prices rising, in the last few months we've seen renewed interest from that part of the world," said Alex Michelin, the director of the high-end property company Finchatton.
Foreign buyers helped to push prices up 4.6 per cent in central London last year, while values in most areas of the UK were either flat or declined, says Savills.
Prices in Knightsbridge and Kensington rose 6 per cent in the final quarter of last year alone, according to the property agency Knight Frank. The company says central London prices are up 26.9 per cent from March 2009.
Overall, UK housing prices dropped 1.1 per cent last year, according to Nationwide, the mortgage company.
Foreign buyers are holding on to their London properties, limiting the number of available apartments, Savills says. The company said although foreigners accounted for 53 per cent of sales in the past two years, only 26 per cent of sellers were foreign citizens.
"A lack of liquidity of foreign-owned prime London property is therefore contributing to the current low stock levels which is, in turn, underpinning prime London prices," Savills reports.
In September last year there was 7.5 months of supply in the prime central London market. It was down to 3.7 months by the end of December, Savills says.
"What we're seeing is a shortage of supply," Mr Cook said. The number of international buyers in London jumped in 2009, at the height of the financial crisis. Foreigners accounted for 53 per cent of sales in the capital's most expensive locations in the past two years, compared with 45 per cent from 2005 to 2008, says Savills.
International citizens bought £6.5 billion of property priced above £5m from 2005 to last year, Savills reports. Over the past two years foreign buyers have increased from 45 to 53 per cent.
Other property agents corroborate Savills's findings. Knight Frank says 68 per cent of the buyers of property priced more than £5m in central London last year were foreign citizens, compared with 39 per cent in December 2008. International buyers are benefiting from declines in the English pound. The buying power of Asian and Middle East currencies has increased by up to 30 per cent since 2008.