Once a barometer for housing in Britain, the London market now seems to exist in a microcosm that’s buoyed by foreign investment.
The good news, however, is that experts suggest that its wealth is starting to ripple outwards.
The housing market in Britain has seen its share of problems in recent years, and in 2012 the annual rate of movement remained in negative figures for ten straight months, ending the year on a one per cent overall decline.
And yet, according to data released recently from estate agents Savills, house prices in London seem to have escaped the gloom and doom elsewhere. Traditionally seen as an index for price movements across Britain, the London market now seems to go one way while the rest of the country goes the other.
London vs. Britain
Since 2008 the London property market has outperformed the national average and risen six per cent, while elsewhere prices have fallen 11 per cent – and the difference is even more stark in London’s prime areas. Experts suggest that the changes are due to demand from overseas buyers, particularly in areas like Chelsea, Westminster, Hammersmith, Camden and Fulham, which have little resemblance with the rest of London, never mind the rest of the country.
London vs. the world’s most expensive real estate
House prices in London’s prime regions like Kensington and Chelsea have risen by 37 per cent over the past five years, which shows a closer relationship with homes for sale in mega-cities like New York and Hong Kong. But the prices in London are much higher; according to a survey by Knight Frank, London homes cost £2,540 per square foot compared with £1,300 per square foot in New York. This places London third on a global scale of most expensive real estate in 2012, beneath Hong Kong and Monaco. New York ranks ninth on the list.
As mentioned, much of London’s property market is buoyed by foreign investment. It’s estimated that half of the properties priced at £2m or more are bought by overseas buyers, and in the realms of £10m+, more than two-thirds of the buyers are foreign. And it isn’t as if London is known for its spacious accommodation: municipal planning controls and a strong rental market mean that instead of building new homes, London developers are converting and enlarging existing buildings instead.
The rest are catching up
Savills are at pains to point out that regional cities in the south are close to levelling with, and in some cases surpassing, their 2007 peak. Weybridge, Sevenoaks, Cambridge and Surrey cities Esher and Cobham all present percentage increases that imply the wealth may be rippling out of London into neighbouring counties. Now the market faces a difficulty that’s perhaps much more culturally significant in that there is a divide emerging between prices in the north and south of the country.