London's Luxury Homes Attract Overseas Buyers Seeking Financial Stability

The scarier things get, the better London homes look to the world’s rich.

A widening range of foreign nationals bought houses and apartments in the British capital worth more than 1 million pounds ($1.61 million), lifting values for the fourth consecutive month in February, according to property broker Knight Frank LLP. Greeks and Spaniards increased investment as their economies reeled and Asians sought a hedge against inflation.

London property is drawing investors facing financial and political instability in their home markets, according to Liam Bailey, Knight Frank’s head of residential research. The overthrow of the Tunisian and Egyptian rulers, triggering uprisings in Libya, Bahrain, and Yemen, will probably bring more Middle East money to London as the rich seek to protect their wealth, Bailey said.

“The number of nationalities buying in London has risen from 46 in 2009 to a new record of 61 over the past year,” Bailey said. Knight Frank has been tracking the number of countries since 2005 when there were 30.

Greeks and Spanish were among the five nationalities that increased investment the most, joined by buyers from Uzbekistan, Hong Kong and the U.S., according to Knight Frank.

Photographer: Chris Ratcliffe/Bloomberg

London homes became cheaper for many foreigners after the pound lost 13 percent of its value against a basket of currencies since September 2008, when Lehman Brothers Holdings Inc. collapsed, escalating the global financial crisis. Close

London homes became cheaper for many foreigners after the pound lost 13 percent of its... Read More

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Photographer: Chris Ratcliffe/Bloomberg

London homes became cheaper for many foreigners after the pound lost 13 percent of its value against a basket of currencies since September 2008, when Lehman Brothers Holdings Inc. collapsed, escalating the global financial crisis.

Prices advanced 1 percent in February from a month earlier, Knight Frank said. The annual gain was 8 percent, the lowest in 14 months.

The city’s most expensive street was Victoria Road in Kensington, where the average home costs 6.43 million pounds, according to a separate study released today by U.K. property website Mouseprice.com.

Pound Loses Value

London homes became cheaper for many foreigners after the pound lost 13 percent of its value against a basket of currencies since September 2008, when Lehman Brothers Holdings Inc. collapsed, escalating the global financial crisis.

Concerns about accelerating inflation in Asia have persuaded many to store their wealth in tangible assets such as real estate, gold, art and antiques, according to advisers for wealthy international buyers.

“London is perceived to be safer than a Swiss bank account,” said John Vaughan, co-founder of Prime Portfolio, which has advised mostly European and southeast Asian buyers on acquiring and managing investment properties for the last 20 years. A lack of homes for sale bolstered the market and supply won’t improve significantly this year, according to his colleague Perry Bousfield.

Status Symbol

London’s position as a global financial center, the quality of its education system and the city’s attractions have made owning a home there a status symbol for overseas buyers, particularly from countries with mining and commodity-led economies, Knight Frank surveys of wealth managers show.

Buyers from Russia and other former Soviet republics will boost their share of London’s “super prime” market of properties worth 10 million pounds or more, from 14 percent last year, Knight Frank’s brokers predict.

Investors from outside the U.K. account for about 75 percent of sales in Mayfair, compared with about 50 percent in 2007, said Peter Wetherell, managing director of property broker Wetherell. He said the company handled about one third of sales in the district last year.

February’s price gains have lifted prime central London home values to 2 percent below the record reached in March 2008. Overseas demand has helped lift values by 24 percent since a year-long decline ended in March 2009, Knight Frank estimates.

That contrasts with the rest of England and Wales, where prices are almost 11 percent below their peak after declining every month since September, according to an index compiled by the Land Registry from completed sales.

Knight Frank compiles its luxury-homes index from estimated values of properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighborhoods of London.

To contact the reporter on this story: Simon Packard in London at packard@bloomberg.net.

To contact the editor responsible for this story: Andrew Blackman at ablackman@bloomberg.net.

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