London prime property market shines as safe haven as Queen celebrates Diamond Jubilee

London prime property market shines as safe haven as Queen celebrates Diamond Jubilee
London prime property market shines as safe haven as Queen celebrates Diamond Jubilee

Property prices in prime central London rose 0.7% over May as European investors sought safer ground in the midst of the eurozone crisis, according to research by Knight Frank.

The latest increase brings prices of prime London houses 47.3% above their March 2009 low.

Knight Frank researcher Liam Bailey says interest from south west Europe has taken up the slack left by Greek investors.

"While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year – those who have had the funds to buy have done so – we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market.”

Bailey says in the event of a European Union break-up, London could experience greater levels of foreign investment.

He says countries at risk of ejection from the eurozone will likely experience a massive outflow of capital, with some destined for London prime real estate.

Meanwhile, property website Primelocation.com has released research showing Britain’s residential property is worth a total of £5.6 trillion ($8.74 trillion), with almost one-third of it £1.65 trillion ($2.58 trillion), in homes in the south-east region.

The south-east region just pips London, which was put at £1 trillion ($1.56 trillion).

Outside of London, Surrey tops the list for total value, £287.6 billion ($4.49 billion), and value per head, £255,125 ($398,274). For value per head, Surrey is followed by Dorset, Buckinghamshire and East Sussex.

Despite low interest rates, however, strict lending conditions make it harder for families to pull money out of these homes by remortgaging.

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“Property wealth per head is driven by one key factor: demand,” says PrimeLocation.com analyst Nigel Lewis.

“Homes in and around the capital will always be sought after because of the increased population density in the south and its better employment opportunities.”

Primelocation.com’s report is at odds with a recent report by Lloyds TSB Private Banking, which put the total value at of privately held UK housing stock at £3.9 trillion ($6.09 trillion) in 2011.

And as our monarch celebrates her 60th year of rule, property agency Savills UK has released an analysis of property trends over Queen Elizabeth II’s long reign.

Since her coronation in 1952, there have been four cycles of boom and bust, but inflation-adjusted figures show house price growth has exceeded 250%.

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As Her Majesty started her rule, the total value of the UK’s housing stock was between £25 and £30 billion ($39 and $47 billion), roughly the same value as Bristol today.

The report found the biggest increase over a 10-year period was 1962-72, when prices increased 48%.

Savills research director Lucian Cook says changes over the past 60 years mean more surplus income is being invested in property.

“Over the past 60 years we have seen great changes in the way we view housing. Our demands on and requirements from housing have changed, meaning that it has become part necessity, part luxury and part investment.”

“Combined with a mismatch between housing demand and supply and a shift to smaller households, this has meant that more of the nation’s surplus income has been directed at housing. As a result house prices have risen more in line with the standard rather than the cost of living, leaving the UK with an asset class worth a total of £4.3 trillion [$6.71 trillion].”

Cook says home ownership has peaked and a repeat of such dramatic growth is unlikely.

“In the short term our forecast is for real house price falls at a national mainstream market level, as inflation strips out price growth. We expect these to lead to a period of much less spectacular house price growth than we have become accustomed to at certain parts in the housing market cycle.

“Future house prices booms and sharp corrections are inevitable but there’ll be a long wait for the next boom.”

Alistair Walsh

Alistair Walsh

Deutsche Welle online reporter

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