Half of London's new homebuyers come from abroad with the city's reputation as a safe haven attracting rising investment and sustaining development.
Foreigners spent more than £3 billion (HK$35.7 billion) on new homes in Britain's capital last year, a 25 per cent increase from 2011, broker Jones Lang LaSalle said.
London has cemented its status as a haven for foreign wealth, with home buying stoking property prices and masking market weakness elsewhere, former Bank of England policymaker Sushil Wadhwani said last month.
The pound's decline has helped attract investors from Malaysia to Russia to such developments as Battersea Power Station where about half of the project's apartments have been sold in overseas markets.
"The London development market would be more challenging without demand from international investors," Adam Challis, head of residential research at Jones Lang said.
"Since development funding from banks declined due to the market downturn, international purchasers have provided a vital lifeline to maintain supply," it said.
Home prices in London rose 10.6 per cent in the year to March 13, led by a 38.7 per cent gain in the City of Westminster where prime districts Mayfair and Belgravia are located, Acadametrics said in a study released on May 10. Rents in London were about 8 per cent higher in March than a year earlier, LSL Property Services said last month.
The Bloomberg UK Home Builders Index has gained 36 per cent this year as rising sales to foreigners boosts shares.
Berkeley Group Holdings, Britain's third-largest homebuilder by market value, sells 40 per cent of its properties to people living outside Britain, managing director Rob Perrins said in a February. Shares of the homebuilder, which has offices in Singapore, Dubai and Hong Kong, have increased by almost a 20 per cent this year.
Only one in seven foreign buyers of new London homes will live in the property and the remainder plan to rent them out, Chicago-based Jones Lang said, citing a survey of buyers.
"Without international investors, most residential developments in London wouldn't happen and the housing crisis would be even greater," Challis said.
London's population is set to increase by about 15 per cent to 9.4 million by 2021, the city's governing councils said in a February report. That would lead to a shortfall of about 250,000 homes by 2020, the report said.
The pound has lost about 12.7 per cent in the past five years against a trade-weighted basket of currencies, a Bank of England index shows.