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Sunday, March 10, 2013

UK property prices soar to a 2 1/2 year high

London property prices
Demand for London property is high and caused prices to rise in 2012

By Grace Matthews

Whilst London’s property prices increased by 7.1% in 2012, international investors have snapped up coveted London real estate, particularly luxury homes. Indeed, commercial lawyer Suzanne Gill reasoned that “International buyers are motivated by London as a world city,” - property prices in Central London are incredibly resilient, and it is easy to buy and sell real estate. Furthermore, the city is attractive to investors due to its political stability, weak currency, favourable tax schemes and financial expertise. Although this is great news for the UK’s economy and property developers, it does affect the ability of local first-time buyers to purchase property.

Global connections

The main foreign participants in the London property market appear to be from Asia – China has invested a significant amount into property and infrastructure, including student housing, water utilities and office space. Singapore, Malaysia and Hong Kong are also major players in prime London real estate. Singapore was the biggest foreign purchaser of these properties in 2012, accounting for 23% of sales.

A recent trend in the London property market is for global sovereign-wealth funds to buy office space in high-end areas – countries such as Norway, Qatar, Malaysia and Azerbaijan have all invested in high-demand commercial properties. The director of the Sovereign Wealth Center commented on the situation, saying that "In fact, it's difficult to walk through the City of London without passing a building at least part-owned by a foreign government pension or sovereign fund." London’s West-End has now become the most expensive business district in the world.

Currently, half of all the homeowners in the prime borough of Kensington and Chelsea were born outside of the UK. Many buyers purchase second homes for the sake of investment, or as a place for their children to stay when they study at London’s prestigious tertiary institutions.

 Future tense

It is estimated that London property prices will increase by 3.2% per annum in 2013, and 7.3% over the next 5 years. Economist Daniel Solomon attributed future growth to “London's comparatively rosy economic growth prospects, buoyed by IT, business and professional services”. Housing pricetags are also driven by supply and demand – the scarcity of these luxury properties escalates the cost. Currently, the houses sold in London’s top ten boroughs are worth more than the property markets of Wales, Scotland and Northern Ireland combined. Property prices are set to reach 500 000 pounds by the end of the decade.

For the global rich, money is no object. The future looks bright for the London property market. Locals, however, may not be so impressed.

About the author: Grace Matthews is a London-based lifestyle blogger who thinks taking advantage of shared ownership London is a great way for first-time home-buyers to obtain a chance to purchase property in the city.

Image credit: By Simon Rohde; GFDL, CC BY SA-3.0

1 comment:

  1. London has remained buoyant in the property market for the whole of the economic crisis, there are a number of factors at play - yes there is foreign investment from the elite rich, but there is also a strong local rental market, investment and development of previously run down areas, the recent olympic games helped a little.