During the last 12 months rents have increased by 9.2% as the desirability of trendy west London postcodes has increased.
The cheap pound and gains in the Chinese Yuan after it shed its dollar pegging are helping Chinese buyers get out of the crowded housing market back home, inflating London prices as interest comes in from all corners of the globe.
Meanwhile, the return of large bonuses to London’s biggest earners has revived the market for plush pads in the capital too, as financiers look to make use of low interest rates to invest their huge bonuses.
Although market interest has been building, we are still some way off of the peaks achieved during the 2007 boom, due mainly to the high deposits required from UK retail banks. For overseas investors who still benefit from around 30% discounts on prices (due to the weakness of sterling), interest is edging closer to those pre-2007 levels.
James Moss from London-based investment agent Curzon Investment Property says that we could see a full return to form in the UK during 2011. With certainty over tax and deficit reduction and continuing low interest rates, prime residential property investment is now more favourable to investors.
James Moss, director at Curzon Investment Property, said: “Almost three quarters of our customers are bankers who are spending anywhere between £1 million and £5 million per property. Often, they will have 30-50% of this in cash, although this will depend on the kind of funding structure they are using. More often than not there will be an offshore company or trust with private bank finance involved.
“While London properties are immensely popular, they are just one global asset class that wealthy individuals invest in. If they are expat bankers then maybe up to 25% of their investment portfolio will be here. For most clients probably around, over 75% of their overall investment portfolio will be in other things.
“Unlike other asset classes, property can be geared meaning that lower equity levels are invested than many people would think so this greatly increases their buying power. So while you can borrow millions of pounds to buy a property, you would not be able to borrow similar amounts to buy shares or invest in gold. That’s what makes property unique and so popular.”
