As speculation about the economic stability of the Eurozone continues to cause global concern, property prices in Prime Central Locations are well under-pinned according to a number of industry reports.  As Urban Exposure’s Randeesh Sandhu observes: “it is hard to predict the impact that the current European sovereign debt crises may have on London property prices, so far there seems to be an inverse relationship; the worse international economic affairs are the better London property markets fare”.  If however, the current economic position escalates and, as the media predicts, there’s a second dip in the global economy, will global wealth begin to seek alternative hedges?

The traditional routes for hedging risk favoured by investors have shown predictable cycles, with gold prices being driven up to record highs, and US treasury yields plummeting to record lows. Recent weeks saw gold prices waver, however this was seen as profit taking by investors as gold charts peeked, or due to margin calls on other parts of investors’ portfolios.  The Swiss government was forced to take action to fix their currency against the Euro in order to reduce demand, so more recently investors moved onto the Yen which has seen record appreciation in recent weeks.

But despite the continued fragility of European and US economies, London property prices are expected to demonstrate double-digit growth by the end of the year according to Knight Frank’s latest market review.  With geopolitical risks at the forefront of many investors’ minds, prime central London is continuing to benefit from the uncertainties faced globally, while investors profit from the weaker sterling position.  As Urban Exposure’s Randeesh Sandhu explains:

“There does appear to be fundamental differences between the crisis in 2008 when demand in PCL fell away and prices dropped. Buyers were reliant on finance, with distressed sellers dominating the market.  Buyers now appear to be cash rich, and properties on the market are from sellers seeking to profit from the market uplift. Having said that as any London agent will tell you, actual transaction levels are still very low, supply is therefore still constrained and demand is not being met – hence the continued price increases.”

Knight Frank’s recent review of rental markets in PCL for the last two years, also seemed to support renewed confidence in the stability of the UK’s economy: “European tenants have grown as a proportion of the overall market, reflective of the demand for accommodation from smaller banks and financial organisations from Europe who have been setting up or expanding operations in London over the past two years.”

It seems that international investors from Eastern Europe, Asia, Africa and the Middle East are demonstrating sustained interest in residential homes in London.  As Randeesh Sandhu explains: “the continued diversity of buyers also underpins demand fundamentals, with no reliance on a single buyer profile, such as the investment banker, or buyers from specific nationalities”.