Savills plc recently released its “World in London” report, which says that foreigners will spend $6 billion on luxury homes in the UK capital this year, partially due its reputation as a financial haven and the continuing weak value of the pound.
The pound has lost 18% against a number of currencies since the end of 2007, which has attracted wealthy foreign buyers to purchase London real estate costing $1.6 million or more. It’s especially attractive to investors whose home markets may be facing political and financial instability, and who perceive London property as being a secure asset.
Groups of foreign investors usually come from Western Europe, while the biggest individual purchases are being made by investors from Russia and Eastern European countries, with the average price being just under $10 million.
Back in April Ukraine’s richest man, Rinat Akhmetov, spent a record amount for a UK home, paying $218 million for a penthouse at One Hyde Park in Knightsbridge.
Savills’ report estimates that if Chinese billionaires were able to move money out of China more easily they could increase prime property prices by as much as 15%. There are numerous restrictions on the amount of cash that wealthy Chinese can take out of their country, and so they currently only make up a relatively small percentage of overseas investors.
As emerging economies such as Latin America, Pan-Asia, China and Africa become more affluent it is likely that they there will be more cities such as London competing for their money, as the potential for investment is huge.
The UK is facing a shortfall of around 1 million homes within four years, and London will be the worst affected even though the coalition government has just announced plans to release sufficient state owned land to developers to enable an extra 100,000 units to be built.