How Ukraine’s unrest will affect prime London property prices
World shares, particularly in banks, insurers, miners and energy stocks, have been hit as a result of the political tension and unrest in Ukraine. But what would be the cost of an economic fallout or any potential sanctions by the West against Russia have on the London property market?
Joshua Raymond, chief market strategist of cityindex.co.uk, argues that the impact on property prices could be significant if Russians were no longer able to invest in the London property market:
A huge amount of Russian assets lie in the UK. Russian wealth is placed in key western banks, whilst the popularity of strategic assets in the UK such as the London property market and even football clubs (Chelsea FC) has held true for oligarchs and wealthy Russian investors for some time. If these assets are frozen and Russians cannot buy into London properties, one of the sources of London’s price bubble will be taken away, putting property prices in London at risk.
However, London Central Portfolio’s (LCP) chief executive and founder Naomi Heaton argued that, even with a decline in Russian investment, there will always be demand from other groups of overseas investors, attracted to the London market because of its safe haven status.
Speaking at a roundtable event hosted by the property firm today, to mark the launch of its fourth residential property fund, Heaton said: “If we don’t have Russians coming in we will have wealthy Ukranians. It is a constant cycle. Anywhere in the world where wealth is being created there is an aspiration to come to the UK.”
The scarcity of stock in prime central London, which comprises mainly of the post codes around Hyde Park such as Knightsbridge and Kensington, will also continue to underpin demand, she added. There were around 6,000 transactions in prime central London last year, amounting to 100 sales a week.
Matthew Sinclair, a senior consultant for Europe Economics and former chief executive the Tax Payers’ Alliance, highlighted that because of its safe haven status, the London market benefits from political risk.
“The threat for London is a rise in political risk here or a reduction in political risk overseas,” he said.