Europe’s rich flood London’s house market

Elizabeth Fournier
THE price of luxury homes in central London has jumped by almost 10 per cent in the past year, driven by demand from wealthy Europeans looking to invest outside of the troubled Eurozone economies.

Prime London property prices have risen 9.6 per cent since July 2010, and are more than 28 per cent higher than two years ago, just after the post-financial crisis trough in March 2009, according to the latest Prime Central London Index from estate agent Knight Frank.

“Once again the main reasons for the level of demand in the prime central London market can be attributed to the increased presence of overseas purchasers and low stock levels,” said Noel Flint, who is head of London residential at Knight Frank.

“In the last month our offices have seen more interest from buyers from continental Europe.”

Property prices in Chelsea and Mayfair have risen most steeply, with values up 7.7 per cent and 7.2 per cent respectively over the past six months.

Overseas interest in London property has traditionally been driven by buyers from the Middle East and eastern Europe, but more recently buyers from Spain, Italy and Greece have been flooding the market in search of secure investments away from turbulent domestic markets.

Research late last year showed that three-quarters of cash-rich Europeans buying property in London do so as a means of diversifying their wealth, and moving assets overseas, with just a quarter buying with the intention to make London their primary residence.

The upward trend in London is in stark contrast to the rest of the country, where average property prices have fallen by more than one per cent over the same period.

Eurozone worries also seem to have hit British buyers desire to move abroad.

Data from online property search revealed last week that interest in homes in Portugal, Italy, Greece and Spain fell by almost a quarter (24 per cent) between the first and second quarters of this year.