London calling with the same complaint about property prices

Just as Hong Kong is grappling with demand from non-local residents for homes and milk powder, Londoners are complaining about a similar spike in prices of property and daily necessities due to demand from overseas buyers and visitors.

"Foreigners, particularly mainland Chinese, are buying up things costing anything between millions of pounds … to everyday items like milk powder and medicine," an aunt who migrated to London years ago complained. "Many are buying up land and flats as well … The flats of a redevelopment near our home were all snapped up by overseas buyers."

According to property consultancy firm Knight Frank, growing demand for prime London property from overseas buyers was one key factor that pushed up prices by about 8.7 per cent last year.

Despite the financial crisis in Europe, prime central London house prices had risen 53 per cent since March 2009, it found. Hong Kong, Jakarta and Beijing are the only major global cities to have outperformed London in price growth since the first quarter of 2009.

Over the last two years, 51 per cent of the £1 million-plus (HK$12.18 million) London homes sold went to non-British buyers, the report said, with the share rising to 60 per cent for properties above £5 million.

South Kensington drew the largest number of foreigners, with about three in four buyers being non-locals in the past three years, the survey found, followed by Kensington, Knightsbridge and Hyde Park.

"London's reputation as a global financial centre, its political stability and transparency as well as its lifestyle benefits ensures it remains a popular choice for the globetrotting elite," it said.

Russians, Americans and Indians were the biggest groups buying prime London flats last year, Knight Frank's poll found. Chinese also figured in the top 15 nationalities buying London property.

A friend says London's housing prices have stayed firm in the past few years because of a mix of huge demand and insufficient supply. "There're too many wealthy Chinese and Middle Eastern people buying up these expensive, but very limited, prime properties," he said. "The huge scale of immigration and the city's diversity have also added to the ever-increasing demand."

And, as Britain imposed strict development restrictions, even when developers were keen to take on new projects, there wasn't enough land in supply from the government, he said.

That sounds pretty much like Hong Kong, except that Knight Frank expects prime central London homes to flatline this year amid doubts about the economic recovery and fears of higher taxes. But for Hong Kong, property experts forecast home prices to climb up to 10 per cent.