Why the credit crunch could hold London back for some time!

London businessmen take a hit!A look around some of London’s more affluent areas is a sight to behold with homes worth tens of millions of pounds, millions of pounds worth of development work ongoing and a seemingly endless supply of buyers.  But it appears that the London property market could be in for something of a reality check as more and more of the rich and famous continue to see their investment portfolios literally evaporate before their very eyes.  

However, while these are the players who have invested millions of pounds into property and live a lifestyle which many of us can only dream of, maybe the dream is dying for many as the economic downturn continues to bite.

We hereby look at some of London premier property investors and the impact the credit crunch has had on their finances over the last few months :-

Lakshmi Mittal & Family

He may literally be the face of the steel industry but Lakshmi Mittal has suffered a massive downturn in his fortunes over the last four months.  While he owns some of London’s more prestigious properties, including two in Kensington palace, he has lost a staggering £21 billion over the last four months which it the equivalent of £180 million a day!

However, spare the tears for the Mittal family as they still have around £11 billion invested in their family steel business Arcelor Mittal.

Vladimir Kim

Since May 2008 it is estimated that Vladimir Kim has seen a drop of some £3.3 billion in his investments to around £4 billion.  Kim has been a major player in the London property markets and while unlikely to be under too much financial strain with over £4 billion in investments, how much liquid assets has he got access to?

Anil Agarwal

Anil Agarwal is the face of Vedanta Resources which was recently listed on the UK stock market where interest from investors was high.  However, the last few months has seen a sharp deterioration in the value of the group and Anil Agarwal is now said to be nursing losses of some £3 billion.

Agarwal is another of the foreign tycoons who have decided to make London their home and he lives in luxury in a multi-million pound home.  At the moment his investments are worth in the region of £4.3 billion after a slide in various metal prices around the world.  The price of commodities may get worse before it gets better but with over £4 billion still invested in the group perhaps the bailiffs will not be around for a while yet!

Mike Ashley

For many years Mike Ashley was a figure whom many people knew about but very few had actually seen.  He did not give press interviews, he was never in the newspapers and slowly built up an empire which includes Sports Direct and Newcastle United Football Club.  But the last 12 months has seen a collapse in the Sports Direct share price, a very public falling out with the Newcastle United fans and estimated losses of over £1 billion leaving him with only a ‘few hundred’ millions pounds left in the bank!

However, yet again another player in the London property market need not worry too much as he is rumoured to be on the verge of selling Newcastle United for up to £400 million – enough to buy a few low priced prime properties in the capital?

Joe Lewis

Joe Lewis is usually found in Barbados but like so many rich investors he too has exposure to the London property market at a time when demand seems to be falling.  He is said to have lost a staggering £602 million on his recent rescue investment in Bear Stearns but do not cry any tears for this old hand at the markets as he still has a personal wealth well in excess of £1 billion.  Indeed he has just acquired a multi million stake in pub chain Mitchells and Butler from fallen investor Robert Tchenguiz who has hit the rocks over recent days.

Joe Lewis is also the majority shareholder in Tottenham Hotspur Football Club which if rumours are correct is on the verge of being sold in a near £1 billion pound deal.

The outlook for London property

While the above is a light hearted look at how some of the rich and famous have seen their investment portfolios hit over the last few months, these are investors who have been there and done it all before.  They did not get into the billionaires club by sitting back and making no provisions for the ‘bad’ times and at the end of the day, how on earth do you actually spend £11 billion?

However, there are a number of major players in the London property market who have brought new money with them and maybe don’t have the same kind of provisions as the names we have mentioned above.  The collapse of the Icelandic financial sector has also left many Russian business giants without access to their assets which have all been frozen while the situation is resolved.  

While we are unlikely to see a mass exodus from the higher end of the London property scene it seems that the ever lasting line of potential buyers may not be as long as it once was.  The value of some of the multi-million pound homes will have fallen sharply over the last few months but these are players who can afford the short term hit in the knowledge that when the worldwide economy picks up we will see more and more international giants of the business world flocking back to London.

Conclusion

While the figures which we have quoted above relate to publically available information about the investments of those in the list, they will all have substantial private wealth well away from the risks of their business dealings.  There will be few mortgages around some of the more affluent areas of London where cash purchases are very often the name of the day.

However, as investment business comes under more and more pressure there are concerns that City bonuses will be a fraction of the £8.5 billion seen last year, something which could well impact on high value end businesses such as wine bars and see more commercial property hit the London market over the coming 12 months.


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