Average UK house prices have recorded bullish growth throughout 2013, but London stands head and shoulders above the rest of the country. Recent figures show that while prices throughout the country are now around seven per cent below their previous peaks, in London the average house price is 8 per cent above its 2007 peak and at an all-time high.
Analysis by a leading property consultancy shows that £22 out of every £100 of equity spent in the UK housing market over the past year was spent in London. This means that of the total £146billion of equity applied to buying housing in the UK, £33billion was spent in London.
Unsurprisingly, wealthy foreign buyers are driving much of the market in London, which will continue to rank as the top real estate investment target in 2014 amongst High Net Worth Individuals (HNWI) in key cities in the East, according to international property consultancy Cluttons.
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The top three drivers for investment in UK property by overseas HNWIs are the capital’s perceived safe haven status, followed by the high capital value growth it offers and thirdly, the weakness of sterling increasing their buying power.
Historically, wealthy foreign investors have preferred prime central London, but there are now indications of outer prime London, in particular southwest, being on their radar. A largely domestic market, this area stretches from Fulham to Wimbledon. Strong price growth has also been seen in other London locations that in the past have lagged central London, including Islington and Wapping.
London’s Southbank is in the spotlight too, thanks to demand for high-quality residential housing, which is expected to transform the area over the next 10 years. This central stretch of the River Thames is on course to becoming one of the most active pockets in London’s prime residential market, and likely to become increasingly attractive to foreigners. A recent image of the Southbank by a property consultancy shows a stunning skyline stretching from Tower Bridge to the redevelopment of Battersea Power Station, including One Blackfriars, South Bank Tower, Shell Centre and the US Embassy.
Meanwhile, there is also evidence that foreign investors have a growing appetite for new-build property in UK hot spots, purchasing an estimated 65-70 per cent of new-build homes in prime London over the past two years. This trend has allowed the new-build sector to remain bullish, with average residential prices in the capital rising by 56.3 per cent between Q1 2009 and Q2 2013, according to a London property agency.
While investors from China, Russia and the Middle East would traditionally have bought for lifestyle reasons, many are now buying primarily for investment purposes, suited to new-build developments.