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Has London property lost its lustre?

25 Feb 2011

Since the housing crash hit the UK property market in 2008 there has been a growing question mark over whether London is still a good bet for South Africans looking to diversify their property assets offshore. 

Since the UK property crash in 2008 there is a growing question mark over whether London property is still a good bet for South Africans invest in.

UKproperty group Knight Frank last week released a report looking at whether London’s residential market, particularly the upper-end, is indeed still attractive as a future wealth hub. 

Liam Bailey, Knight Frank’s head of residential research, says there’s no doubt that central London had lost some of its allure as an international property investment destination following the 2008 crash. The UK government’s intervention in the housing market through higher stamp duty for £1m plus properties and a more punitive tax environment hasn’t helped either. 

However, Bailey says demand for residential property in central London has bounced back strongly in recent months with the city starting to re-establish itself as a global real estate and financial hot spot. Bailey notes a strong return of international buyers, particularly in central London’s prime (£1m plus) and super-prime (£10m plus) suburbs. 

Buyer registrations in the fourth quarter of 2010 are up a hefty 18% year-on-year. Bailey says buyers from 50 different countries bought property in London through Knight Frank in 2010, compared to only 30 or so two years ago. 

Says Bailey: “The widening of international demand points to the fact that the impact of global wealth is felt very keenly in central London. Upper-end house prices in central London have already risen by an average 8% in 2010, while some individual properties have seen growth of as much as 20%.” 

Bailey believes London’s upper-end could record price growth of 5% to 10% in 2011, with a number of big-ticket sales already achieved in the first few weeks of 2011. He says the recovery in demand is being underpinned by a weak pound which is effectively giving dollar-based property buyers a 25% discount to prices paid at the peak of the market in September 2008.  

The Eurozone crises has also supported new demand from European buyers who still perceive London’s residential market to be a ‘safe-haven’ investment destination. In addition, rising inflation globally is beginning to create higher demand for tangible assets such as bricks and mortar.  

Bailey says growing political concern around many parts of the world - most recently in Egypt and Tunisia - is also helping to draw buyers back to the London market. 

Currently, the most popular areas for upper-end buyers are still those close to Hyde Park with demand extending north through St John’s Wood to Hampstead, Chelsea, the South Bank, South Bayswater through to Marylebone as well as Mayfair and St James. - Joan Muller

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About the Author
Joan Muller

Joan Muller

Freelance property writer at property24.com.

Freelance property writer at property24.com.

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