Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Foreigners spend £3.7bn a year on London residential property

Foreigners spend £3.7bn a year on London residential property

Overseas investment into London real estate is running at £3.7 billion a year and at this rate, foreign buyers will own all residential property in Greater London by the middle of the next century, according to Savills. 

They are responsible for 34% of all London property transactions although most investment is channelled into high-value residential properties areas such as Mayfair, Kensington, Notting Hill and Chelsea. Within central London, foreign buyers accounted for 65% of all funds exchanged for properties valued at more than £5 million.

But the trickle-down effect of these capital injections has been limited by the concentration of these funds towards west London. ‘It is as if the equity is getting stuck in prime south-west London; of the £3.3 billion into prime London, only £0.5 billion left via the large south-west markets in 2010,’ said Savills’ head of research, Yolande Barnes.

Inflows at the top end of the market are starting to spread into less central London locations, pushing UK property owners further out. Because the number of foreign investors buying in London has climbed since 1960 and UK owners tend to hold properties for less time than overseas investors, London’s property market is becoming increasingly international, with substantial ramifications.

External property investment has been driven recently by upheaval across the Middle East; central London property has become a financial parking space for high net worth individuals in a period of low interest rates and high political and economic volatility. Increased purchases from Greece, Spain and Italy suggest a similar motivation.

Should this trend spread further East, Chinese mainland billionaires would have the capacity to increase ultra-prime real estate prices by as much as 15%. Western European, North American and Middle Eastern investors are the most prolific buyers in London, followed by Russian, Indian and Pakistani nationals.

Savills says South Asian spend is also highly significant in London, as the value of house purchases from India and Pakistan exceeds that of investors from elsewhere and strong national and personal ties create scope for wider investment.

‘China, Asia Pacific, Latin America and even Africa all have huge potential as future sources of inward investment to London real estate,’ Barnes said. ‘The already established preference of buyers from the Asian sub-continent for London will mean that Indians will be among the most important buyers from the emerging countries in the future.’

As this high value spend limits supply and increases prices in specific neighbourhoods, those local property economies could benefit but at the expense of the city’s less glamorous postcodes. The hope is that the overseas effect will source capital for flagging local markets.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
CIO Tapes 2: two warnings and a lot of optimism

CIO Tapes 2: two warnings and a lot of optimism

Our group of leading asset management CIOs see a lot of opportunities – and overseas investors are buying UK too

Play Wealth Manager Retreat 2017: size isn't everything

Wealth Manager Retreat 2017: size isn't everything

We asked our delegates at the Wealth Manager Retreat what they think about the recent wave of consolidation in the industry.

1 Comment Play CIO Tapes - part 3: 'passive funds are anti-capitalist'

CIO Tapes - part 3: 'passive funds are anti-capitalist'

Citywire recently gathered three of the UK's leading fund investment heads to discuss their hopes, fears and the issues that their jobs throw at them daily.

Read More
Your Business: Cover Star Club

Profile: Kleinwort Hambros' boss on how to manage five banks

Profile: Kleinwort Hambros' boss on how to manage five banks

Welding together Kleinwort and Hambros – two of Britain’s most historic banks, founded in 1786 and 1839 respectively – was always going to be a challenge.

Wealth Manager on Twitter