Prime London property boosted by overseas buyers

10th May 2013OverseasProperty Market

f0cf97f4cd75f4546b81e4c01f3030e3The weak pound has made property in prime central London even more enticing to foreign investors seeking safe havens and will continue to do until 2018, according to Knight Frank’s London Residential Review.

Prime Central London residential property prices rose 0.7% in April, and have been rising now since November 2010. Much of this rise is underpinned by the demand from overseas buyers who accounted for 52% of all £2m+ homes sold in prime central London (PCL) between March 2012 and March 2013.

With the pound entering a renewed phase of weakness we have examined the impact of currency arbitrage in our summer review of London’s prime residential market. In the report we provide a detailed assessment of recent and future implications on relative pricing for international purchasers.

Currency discounts

In sterling terms, property prices in PCL now stand 17% above their previous March 2008 peak. However, taking into account currency fluctuations, prices for prime London homes for individuals purchasing in US dollars are 11% below their March 2008 level.

For euro-denominated buyers, prime central London homes have risen 9% since 2008.

As the US emerges from the recession in better shape than most developed economies, the dollar is expected to benefit. A string of upbeat economic data and an anticipated end to quantitative easing should ensure the dollar continues to strengthen against the pound and euro over the next five years.

Indeed, our research, which takes into account EIU currency forecasts and our own predictions for prime central London property, shows that by 2018 prime central London property prices will have risen 20% in US dollar terms. In contrast, prices will rise 26% in GDP terms.

As a result, entry to the prime central London property market will become more affordable for dollar-denominated buyers and for those whose currencies are pegged to the US dollar.