The mega-wealthy have been pouring money into central London's bricks and mortar, with prices in prime areas having risen by half since March 2009.
Global rich buying prime London property as prices soar
London has long been a place of refuge in troubled times, but today it is the global rich who are using it as a haven.
Politically insecure Russian oligarchs, overtaxed French émigrés, nervous Greeks, newly rich Chinese and the Middle Eastern mega-wealthy have been pouring their money into London's prime bricks and mortar.
They are certainly not going there for the weather (the United Kingdom last year suffered its wettest year on record). They are drawn by the country's favourable tax regime, weak currency, political stability, banking expertise, multiracial mix, cultural scene and the fact that the British capital is a great place to party and shop.
London has rolled out the red carpet to the global rich, who now pay an incredible US$9,700 (Dh33,057) per square foot for the privilege of owning residential floor space in the city's prime central area.
That makes it the prime property capital of the world, more expensive than Hong Kong ($8,890 per sq ft), New York ($8,567), Sydney ($7,080) and Paris ($4,688), according to the property adviser CBRE.
Since March 2009, prices in prime central London have risen 49 per cent, five times faster than the remainder of the recession-hit UK, says the estate agent Knight Frank.
But can London maintain its supremacy, and should you be investing there?
London isn't one property market but two, says Naomi Heaton, the chief executive of the residential fund manager London Central Portfolio.
"Investors needs to make a clear distinction between prime central London and greater London, because the two property markets work in entirely differently ways."
Prime London refers to just two of the 33 boroughs that make up greater London, the Royal Borough of Kensington and Chelsea, and the City of Westminster. "They are collectively known as the West End, which covers just six square miles spreading out from Hyde Park. It is a financial centre, an educational hotspot, an international playground and a 'go to' destination. Around 60 per cent of buyers in this area come from overseas."
Property price growth has averaged 9 per cent a year over the past 40 years. "In the last 15 years, the average property has increased sixfold from £221,679 to over £1.35 million [Dh7.67m], according to Land Registry figures," Ms Heaton says.
Growth has been driven by an explosive combination of strong global demand and tight local supply, due to strict planning laws protecting the city's historical buildings and parks. "A mere 5,226 properties changed hands in prime London in 2012, an average of just 100 a week. That's a tiny number, when you consider the amount of people who would like to buy here."
Greater London is a different world, especially as you drift further from the centre. "This is a domestic housing market that reflects the pulse of the UK economy, which is currently in the doldrums," Ms Heaton says.
Prime London property enjoyed a storming 2012, says Brian Murphy,the head of lending at Mortgage Advice Bureau. "The average purchase price rose 14.5 per cent in 2012 to £513,591, our figures show, which is a healthy investment return."
Mr Murphy expects London to stay one step ahead "It has a rich heritage and cultural scene. English is the international language of business, and London bridges the time gap between Asian, European and US financial markets."
London's links with the wider world make it difficult to see any slide in demand, adds Richard Bradstock, senior consultant at IP Global in Dubai. "Couple this with an inherent lack of space, a shortage of new supply, affordable mortgages and a strong rental market, and London represents a good medium and long-term investment."
Only New York can challenge London as the pre-eminent global city.
"You can still buy property in New York at pre-2007 levels, which is unthinkable in London. Many of our buyers are now shifting from London to New York to diversify their portfolio,"Mr Bradstock says.
High prices are not the only threat facing investors. The influx of foreign money and offshore speculators has priced locals out of the market, aggravating divisions in a country already split by wealth and class.
Last March, the coalition government increased stamp duty to 7 per cent for individuals buying properties of more than £2m, adding £140,000 to the purchase cost. Companies pay 15 per cent, and further property taxes could follow.
Sales of properties above £2m plunged 25 per cent after the tax was introduced, says James Hyman, the sales manager for residential property at estate agents Cluttons in London. "This excessive initial tax charge has made it harder for overseas investors to enter the market."
Another concern is that the City of London's status as the world's financial centre could also be eroded by tough new European Union financial services regulation, and the historic shift of wealth, power and influence from the West to East. That would also reduce overseas demand.
Mr Hyman says London has too much to offer to struggle for long. "It has never disappointed investors. If prices fall in the short term, they typically correct themselves within 18 months to another all-time high. No other city offers such sustained stability."
The Royal Institute of Charted Surveyors predicts prime central London will be "broadly stable" this year, although new UK property taxes may continue to deter the wealthiest foreign buyers.
London will continue to attract foreign buyers, but the stability they are looking for now comes with an increasingly hefty price tag.