Britain may still be reeling from the aftershocks of the financial crisis of 2008 and the more recent contagion from the ongoing Eurozone debt saga, but one sector of the economy is proving resilient and even thriving.
Property prices in the UK saw their biggest monthly increase in a decade in February, rising 4.1 percent versus last January, according to Rightmove’s House price index. Rightmove described the bounce as a ‘surprisingly strong uplift given the challenging economic environment,’ and attributed it to cash-rich sectors of the market like London ‘where buyer demand is exceeding suitable property supply.’
“London is regarded as a safe haven,” Rightmove’s Mathew James told Al Arabiya. “There’s a confidence and certainty around property in the capital.” James explained that prices are also supported by the fact that supply of new properties on the market in London is lower that demand. Demographics also play a part, with more cash-rich and foreign buyers driving prices up.
Those factors also make London less susceptible to economic downturns so even when the UK economy is itself suffering, the so-called gold standard of London real estate maintains its sheen.
“London is often seen and often regarded as more resilient than national market,” James said. “We’ve been in four years of a depressed market and London is often the generator that pulls the national market out of the doldrums.”
London house prices rose in February by 2.5 percent compared to the prior month and by 4.2 percent compared to February 2011, with the average asking price reaching £449,252. That’s less than 1 percent below the all-time high of £450,210 recorded in October of last year.
Prices in the capital are already nearly double the national average but it is the luxury end of the market, flush with cash-rich buyers, that is really driving price increases. Wealthy investors from around the world continue to pour their cash into prime London properties, seeing it as a safe haven investment in the wake of increasing economic uncertainty.
Apart from the fact that Britain is relatively stable politically and economically, the basic fact is that demand for central London properties far outstrips supply. Estate agents explain that even as the government strives to provide more housing around the capital, this will not affect prices in the holy grail areas of Mayfair, Belgravia and Knightsbridge because there is limited scope to build new houses in those neighbourhoods.
Since the end of last year, estate agents have been reporting an increase in demand from European buyers in particular, as the Eurozone crisis escalated, with more Greeks, Italians and Spaniards snapping up prime properties.
Simon Hedley, Managing Director of Druce’s estate agents in the Marylebone area near Oxford Street, says demand is on the rise, especially from European buyers. He has seen a 40 percent increase in Greek, Spanish and Italian buyers. “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.”
Of particular interest to international buyers are restored and fully renovated period homes that boast all the modern conveniences and high tech gadgets but with the charm of period features. Al Arabiya was given access to a 7 bedroom Georgian townhouse in the Marylebone area near Oxford St and Regent Park on the market for £12.5m.
Hedley describes London’s prime market as “bulletproof” and says he expects prices at the high end of the market to keep rising, regardless of the economic outlook. “Even if Britain’s economy has a little bit of recession, the property market is very strong,” Hedley said. “In the 24 years I worked in this area I’ve never seen prices go down.”
(Carina Kamel is a Senior Correspondent for Al Arabiya based in London and can be followed in twitter @Carina_bn)