London Prime Real Estate Is Well Insulated Against Market Turbulence

London’s prime property is uniquely positioned to weather turbulence in the UK market, relying on an insulated buying segment attracted to its historical appeal as a secure investment. …

London’s prime property is uniquely positioned to weather turbulence in the UK market, relying on an insulated buying segment attracted to its historical appeal as a secure investment. While lending constraints, supply issues and economic malaise impact the broader UK real estate market, only the most expensive prime property has responded with price cuts. See the following article from Property Wire for more on this.

Although prime central London property is not immune to the volatilities currently found in the UK real estate market, long term support from overseas buyers and wealthy bankers will sustain it, it is claimed.

‘The increasingly downbeat data and forecasts for the wider UK property market reflect the on-going strains within the UK economy. Mortgage finance remains difficult to acquire, widespread public sector job losses are imminent, tax rises are looming and the significant demand/supply imbalance of the last year is equalizing. None of these is a major factor in prime central London property,’ said Camilla Dell, managing partner of Black Brick Property Solutions.

She believes that prime property in the capital is an unique asset class that continues to enjoy a large number of long term supports and demand will remain strong for the best properties in the best areas.

Dell points out in the company’s August update report that long term supply constraints governed by strict planning criteria, a broadening international demand base whose wealth is largely immune to the troubles of Western economies, cash rich buyers unaffected by tightening bank lending standards and the increasingly self fulfilling view that London remains ‘the’ place for the international elite to educate their children and to socialize will sustain the market.

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‘These factors are also all at work in the prime central London rental market with a shortage of high quality properties helping to drive rental returns ever higher. The strength of the prime rental market in London continues to attract investors,’ she added.

The biggest short term risk to prime central London property prices may come from a continued strengthening in sterling against the US dollar and other global currencies but analysts at Black Brick do not believe that international interest in prime central London is wholly reliant on currency benefits or overwhelmingly speculative in nature.

They expect prime central London property to be the favored choice for many investors who view the capital as a safe haven. ‘If the pound does indeed strengthen and delay some of the more speculative investors, London’s financial services heavyweights are back in a position to take up at least some of the slack. London’s position as one of the world’s pre-eminent financial centers has meant that the financial services sector has long provided a steady stream of affluent potential buyers and high quality corporate tenants in prime central London,’ said Dell.

‘The credit crunch and the weakness of the pound reduced the importance of the financial sector to prime central London property, but recent corporate results suggest this may change.

News of a sharp rise in profits across the global banking sector, and that bonuses in the City of London have risen 25% in the latest pay round means that a relatively significant proportion of the estimated £10 billion in bonuses paid to London based bankers will inevitably be spent on property in general and prime London property in particular,’ she explained.

If any segment of prime property is vulnerable it is the very top end above £10 million where there is proportionately much greater supply to demand and where discounts of
10% to 15% off the asking price are becoming more commonplace, according to Dell.

‘But overall we believe the long term supports for prime central London property remain very firmly in place,’ she added.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.


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