Despite global, social and economic uncertainty prevailing throughout some of the larger European countries, the UK is still seeing substantial global equity inflows from abroad, underpinning demand and increasing prices within London’s prime and super prime residential markets.  These are sentiments echoed by Urban Exposure’s Daljit Sandhu: “this latest research confirms our own findings”.

According to the latest Savills quarterly report: Prime London Residential Markets, the vast majority of investors are foreign nationals, making up more than half of the buyers in London’s most exclusive residential locations:

“Some 58% of buyers were foreign nationals, with over one in five buying for investment.  Less than half of buyers were acquiring property for use as their main residence and British buyers accounted for less than half of all purchases.”

Key London boroughs are still enjoying an increase in values, although across the South West and East of the city prices are stabilising. Prime markets subject to domestic demand are showing on average lower levels of price growth than those where overseas equity dominates.  It remains true however that prime London is still enjoying a relatively resilient market when compared to broader mainstream UK property, as observed by Savills of sales completed within PCL:

“Within prime South West London, values rose by 1.3% in the quarter, taking annual price growth to 7.1%. This continued price growth has been underpinned by low levels of available stock. Those households selling prime family homes in the area are tending to recycle their housing wealth locally rather than make a move into the commuter belt.”

In terms of sales price to asking price ratios, South West London experienced 95%, east of the City 94%, and North London’s prime markets (including Hampstead and Islington) saw sale prices average 1% to 2% above the original asking price in the third quarter of this year, up to the end of September.

However in terms of price growth over the quarter, North London experienced zero growth, compared with 0.8% in East London and 1.3% in the South West, but as Urban Exposure’s Daljit Sandhu observes, North London is likely to see gains by the end of the year: “prime areas in North London are definitely strengthening based on a ripple effect of buyers being pushed out into other areas, and developers raising the bar with the products they’re now producing to fulfil such interest.”

Daljit Sandhu goes on to explain that in areas seeing high demand, prices are exceeding the value of the property, as vendors look to maximise on potential returns:

“There is probably some over-pricing in South West London with buyers trying to take advantage of the buoyant market and capitalise on foreign demand.  Vendors look at the record prices being achieved at schemes like One Hyde Park and probably raise their sales prices thinking they can ride on the back of the market impact.”

Urban Exposure provide mezzanine funding to high-end residential developers in London and the South East http://www.urbanexposureuk.com/en/finance/mezzanine-finance/