London for sale! 85% of homes in the capital’s centre sold to overseas buyers as weak pound sees foreign interest soar
The extent to which London’s irrepressible housing market is being propped up by foreign buyers was laid bare by figures showing as much as 85 per cent of prime London property purchases last year were made with overseas money.
Estate agent network London Property Partners reported that just 15 per cent of its sales in the past year were made by UK buyers. Of the foreign purchases, 80 per cent were from Europe and 20 per cent from Asia, LPP said.
LLP agents operate mainly in prime locations such as Pimlico and Fulham but also take in more affordable areas such as Tooting.
Overseas buyers: London has seen a huge influx of foreign buyers in recent years – while the pound has plummeted
However, the trend of foreign buyers providing most demand was continued in wider market figures. LLP said analysis of house price indices from HMRC, Knight Frank and Savills indicated that around 65 per cent of purchases were made by foreigners.
In terms of prices, the prime Central London market has marginally underperformed against the wider market in the capital over the last 12 months, with total growth of just three per cent, LPP said.
However prices in the £5 million-plus bracket are still over one third higher than they were prior to the 2008 downturn, having been fuelled by international demand that has accounted for 67 per cent of purchases.
LLP predicts price growth across prime London of four per cent over 2013, contributing to five-year growth to the end of 2017 of 32.5 per cent.
Miguel Janin, director at London Property Partners, said: ‘Prime London real estate is internationally viewed as a good investment opportunity, and not a bubble market.
‘Over the past 18 months, overseas investors have continued to dominate with demand from sovereign wealth funds concentrating on large trophy assets in both the City and West End.’
Of property valued over £10million, the capital accounted for £2.3billion worth of transactions in the last year, a figure 16 per cent higher than five years ago.
An increasing number of international buyers are coming from Asia though interest from continental Europe accounts for the majority of transactions.
The Battersea Power Station development for example has sold out of most of its 866 luxury apartments – all to Singaporean investors looking for a safe haven.
Average prices in prime central London have hit £1.4m, according to analysis of Land Registry data by London Central Portfolio, up 13 per cent on a year ago.
Driving overseas demand has been the weakness of the pound. Sterling has plummeted against a number of currencies in recent times. In July 2012, when sterling was at its strongest point against the euro in the last 18 months, £1 would buy €1.29. Today, it has dipped under €1.18.
At the end of 2011 £1 would buy $2.06 Singaporean Dollars but this was $1.88 in April. At the start of 2013 £1 bought $1.62 US Dollars but this has slipped to $1.55 in just a few months.
Alistair Cotton, senior analyst at Currencies Direct, said: ‘The UK export market has failed to flourish by advertising the weaker exchange rate as a price cut for trading partners.
‘However, as prime London real estate prices remain sky high, which points to significant demand, a falling pound has been the equivalent of a discount for foreign buyers looking to acquire assets in the UK. As with any rational consumer, overseas investors are keen to take every advantage they can.’
Battersea development: Demand for luxury apartments has been fierce – with the complex almost selling out
Is foreign investment making rental prices in London unaffordable?
Tenants in Greater London have an average of £254 less disposable income every month than they did during May 2012, according to the latest HomeLet Rental Index.
The data shows that the average cost of renting a home in the capital increased by 3.1 per cent over the past year to £1,233 per month. In contrast, the average amount a tenant earns in Greater London decreased by 6.8 per cent to £36,000 per annum.
Renting a home in the capital is now 84.6 per cent more expensive than the rest of the UK
All of this reinforces how much Greater London tenants’ purse strings are increasingly being stretched.
Recent research by Cluttons found that tenants are seeking to move to the peripheries of prime Central London, primarily zones two and three, in search of lower budget properties as they attempt to minimise outgoings.
It found that the volume of applicants with higher budgets is in decline, a trend which is expected to persist over the coming months.
Areas to the East including the Isle of Dogs, Limehouse and Wapping have seen an increase in tenant demand of 42 per cent between September 2012 and March 2013.
Similarly, Clapham, Battersea and Wandsworth in the South West have collectively seen a 53 per cent quarterly increase in tenant registrations in the first three months of the year, with a corresponding upturn in rental values across the area.
House prices rise around the world – but UK the sole riser in Europe
Worldwide prices: How property values across the continents have fared
Thirty five of 55 international housing markets tracked by Knight Frank’s recent global house price index recorded an increase in mainstream property prices in the year to March.
Property prices in all world regions, except Europe, increased in the year to March.
Prices across the Middle East are up 10.6 per cent on average while Hong Kong is up 28 per cent. In mainland China prices are up by 23.8 per cent in the last 12 months – and by 10.7 per cent in the first three months alone.
Greece, Hungary and the Netherlands occupy the bottom three rankings this quarter having seen prices fall by 11.8 per cent, nine per cent and 8.3 per cent respectively.
UK property prices rising by 0.2 per cent in the year to March and stand 8.9 per cent above their recent low at the start of 2009.
However, much of this growth is masked by rising London prices propping up the rest of the country – it has developed its own market. The average property price is a record £375,795 in the capital, and rising.
The capital has not been immune from the crisis – prices fell by 15 per cent in 2009 – but have climbed steadily since then.
Within London there are also hotspots. The borough of Lambeth, which includes Brixton, has climbed by nine per cent in the past year, Camden is up 12 per cent and Wandsworth by 11 per cent.
At the same time, the average property price in the North-East is £95,546 – having fallen six per cent this year.
Since the peak in the housing market in August 2007, property values in Middlesbrough have plunged by a third from £107,497 to £72,308.
In Blackpool and Blackburn prices have dropped by eight per cent this year.