London is more than just a commodity

Nowhere competes to an English summer, when we see it, and London’s mews streets particularly demonstrate its beauty. This time of year sees people flood to London to experience its wealth of summer attractions and eat home grown strawberries in SW19.

However, London’s aesthetic and habitable splendour does not necessarily explain the continual flow of international wealth into prime central London as fewer than half prime central London buyers treat their purchase as their main home, and the rest are just investments. The phenomenon is considered to be driven by money, pure and simple, and prime London property is a straight forward commodity. Similar to any tradable commodity, thousands of London new builds are being bought by Chinese investors before they are built and without receipt of delivery.

If the majority of buyers are basing their purchase solely on the benefit to their purse, prime central London is susceptible to opportunity costs like any investment. The major concerns are London properties’ vulnerability to currency exchange rates and government taxes that may change the way global investors think of London. It has benefited from a weak Sterling and there is a terror that a collapse of the dollar or of Asian currencies, which have shown similar strength against sterling, could badly damage demand for London homes.

However, property over the whole of Britain has benefited from global currency advantages yet many areas have experienced price reductions since 2008. This suggests that London property is more than just a tradable commodity, its aesthetic splendour coupled with its important location, makes it appealing to foreigners to live. London is not only a major destination for global investment but also a location where a large number of foreigners choose to make their home (35% of all London’s residents were born overseas). It is steeped in history, buzzing with energy and constantly leading the field. The question is, will its splendour sustain adverse currency fluctuations and mansion taxes?

We think so. Despite its weather, people aspire to live here and it is the fastest growing city in Europe. In addition, the dependence of foreign buyers is no new affair and George Osborne’s policies seem continually geared to keeping house prices high.

We predict prime central London prices will continue to rise. However, rich overseas buyers investing and squirreling prime properties has restricted turnover making it increasingly difficult to purchase due to low stock levels and high demand. Therefore, it is extremely important to be well advised and in a good position to compete to purchase in prime central London.

Written by George Nares | Sales Negotiator