London still calling as a safe haven for buyers
The euro zone's worsening debt crisis is a dark cloud passing over the international economy, but for London estate agents it has a silver lining. Southern Europeans are moving money out of their economically troubled home countries into the British capital's property market, where it is driving up sales transactions and prices.
International real estate adviser Savills says the number of Greeks looking to buy multimillion-pound homes in prime central London has increased 20 per cent over the past year, and the number of Italians, 30 per cent. London property consultancy EA Shaw says 16 per cent of home sales made through its Covent Garden office in 2011 were to Italians.
One third of buyers listed at Marylebone-based estate agency Druce come from Greece, Italy and Spain. 'The seemingly never ending sovereign debt crisis is pushing more and more of them to London because it's a safe haven for their cash,' said Simon Hedley, managing director of Druce.
The firm's Spanish, Italian and Greek buyers were pulling money out of 'weak' Mediterranean banks and investing it in London property which they believed would hold its value, Hedley said. These buyers wanted to avoid paying higher 'austerity' taxes in their home countries and to avoid future volatility in the value of the euro, he added. Britain is outside of the euro zone.
These European buyers join wealthy Arabs who have been buying London homes since the Arab Spring started in January.
In addition to its Arab and European buyers, central London estate agency, Beauchamp Estates, says its largest group of purchasers are Russians and citizens of the Commenwealth of Independent States.
Penelope Court, partner at Beauchamp Estates, said the rule of law attracted many buyers. 'Purchasers have faith in our justice system in as much if you purchase a property here, then you do actually own it,' she said. 'London is also perceived as a secure city and people appreciate that they can walk about in the city relatively freely.'
At north London estate agency Aston Chase, overseas demand has risen to as high as 75 per cent of all buyers at some branches with most purchasers coming from eastern Europe and the Middle East.
Buyers agency Property Hunt has experienced surging demand from overseas buyers in the past twelve months, mostly from China, because they perceive London as a safe haven, the company's managing director, Russell Hunt, said. A survey published this month by the Hurun Report and Bank of China shows 60 per cent of mainlanders with US$1.6 million in wealth are emigrating or are considering doing so. Hunt expected some of them will come to London.
According to estate agency Knight Frank, Europeans, Arabs and other foreigners looking to lock away their wealth in prime central London property have helped push up agreed sales 12 per cent and prices 12.5 per cent over the year to October 2011.
Liam Bailey, head of residential research at Knight Frank, said geopolitical issues were likely to push more overseas buyers into London next year, including Russians concerned about the outcome of the 2012 general election and Arabs seeking refuge from Middle East turmoil.
But, London is not immune from economic problems.
'One must be mindful of some of the fundamentals,' said Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors. 'If the euro zone crisis worsens, that will affect the British economy and labour market. (London home sales) volumes have been so high, there maybe some price adjustments.
'The super-prime market may still hold its value. There is less worry about short-term price gain and rental return, since owners are less interested in letting out these properties.'
The price, in US dollars, per square foot of prime London property, the second most expensive city in the world. Source: Global Property Guide