These findings add to the growing portfolio of evidence that overseas investors are helping to keep London’s prime property market in such a purple patch. Foreign money seeking a refuge from wider economic difficulties is keeping prices buoyant and the report claims that overseas investment accounted for 60% of all prime acquisitions between 2007 and 2011 and has led to more than half the resident population of boroughs such as Westminster and Kensington & Chelsea originating from outside the UK.
But while the capital’s prime property market is currently benefitting from the uncertainty - causing Greek, Spanish and Italian property investors to flood into the London high net-worth arena - the report suggests a full break-up of the Eurozone would not be good news.
The report rhetorically portrays a worst-case scenario where sterling would appreciate against the newly-formed currencies, global equity markets would tumble and once the crisis had passed, the safe haven factor linked with prime Central London property would diminish. It goes on to suggest that investment would then flow out of London and into cheaper capitals in Europe.
Nothing lasts forever in economics and I’m fully aware that the property market goes in cycles, but if the this state of affairs were to play out, I wouldn’t expect the prime London market to be devastated in the same way the wider market was when the credit crunch hit. For a start, London’s wealthy property investors come from much further afield than just the Eurozone and secondly, while safe haven prospectors may account for a sizeable chunk of owners, there are still plenty of high net-worth individuals who acquired properties in the capital for a whole gamut of other reasons.
What the report does serve to remind us is that it is never wise to place all one’s eggs in one basket and the London prime property market is at a risk of becoming too dependent on overseas investors, but it is to be fully expected that domestic buyers will regain their appetite once the country fully emerges from recession.
London will always be a desirable city to own luxury property in regardless of the economic environment and all the tumult of the past few years has done is alter the percentage of buyers coming from the UK versus those from beyond these shores. We may have had to bail out some of our banks, but the situation has never become quite as desperate as some of our European counterparts and our political system is – on the face of it – mercifully less corrupt than the structures in place elsewhere. This is why I am convinced that whatever happens with the Euro, London will remain a safe haven for investors from Europe and beyond for the foreseeable future.
Hugh Wade-Jones is Director of Enness Private Clients