London Central Portfolio (LCP) has issued guidance regarding the central London flat market aside the launch of its £100 million fund which will acquire one bedroom and two bedroom apartments in some of London’s more luxurious districts. This statement, commenting upon the expected future performance of the central London market, suggests that the “average small” central London flat could cost a staggering £36 million by 2050!
While we always have to take long-term forecasts with a pinch of salt, because they have historically been very unreliable, there seems to be some credence to this particular forecast. So why would an average flat in London costing £1.5 million be worth £36 million by 2050?
Past performance and future forecasts
First of all it is worth saying that LCP is a well-established property investment company with particular experience of the London market. This is a company which has been studying the data relating to property prices within central London and managed to glean the simple fact that over the last 40 years central London property prices have on average increased by 9% per annum. When you bear in mind that this takes into account an array of property market crashes, difficult economic situations and indeed the recent implosion of the euro, this is most certainly an eye-catching statistic!
Quote from PropertyForum.com : “When you bear in mind that Ireland is just starting to recover from a £56 billion rescue package from international lenders it may surprise many to learn that Dublin property prices have rocketed.”
Using the 9% per annum growth figure the average central London flat would cost £6.3 million by 2030 and a staggering £36 million by 2050. While for many of us these figures seem astounding and way out of line with the current economic situation, 2050 is a long way off and the statistics don’t lie, the central London property market has been growing at 9% per annum for 40 years. Whether this will continue remains to be seen, whether investors continue to pour money into London is debatable but it is most certainly a conversation starter.
For many years now so called “experts” have been forecasting a fall in the number of overseas investors ploughing money into the London property market. They have concluded time and time again that the money would run out, investors would move to other markets and central London property prices would collapse. So far these forecasts have been well short of the mark and while historically those in countries such as Russia have been keen to invest in the London property market, let’s not forget those from the Middle East and other countries with strong economic growth.
It is very difficult to predict how overseas investors will react to the ever growing cost of property in central London, whether indeed there will come a time when investors decide to cash in their chips or whether, as some suggest, the London real estate market has become something of a safe haven. Whatever the case, there is no doubt that London property continues to remain very strong, there is not only growing domestic demand but very strong support from overseas and the UK authorities seem unable to dent this confidence.