While the London market has perhaps been a little disappointing of late there are signs of a further influx of foreign funds just around the corner. The ongoing demise of the Chinese stock market as well as the array of restrictions imposed by the Chinese authorities has not gone down well with investors. There are signs that more investors are now looking towards real estate as an alternative to the traditional stock market route with London firmly on the agenda.
Why the new influx?
Some investors are complaining that it is becoming more and more difficult to move funds from China to other markets. When you bear in mind that the free movement of capital is one of the foundations of any successful investment market this does not bode well for the short to medium-term outlook for China.
While it would be wrong to suggest there has been no movement or indeed improvement in fund flow restrictions in China over the last 50 years or so, the government is not exactly helping the situation at the moment.
London prime property flat
While London prices on the whole increased by 2.3% over the last year the prime property market has been “flat” with properties valued at over £5 million actually falling by 4.7%. This is as a direct result of the increase in stamp duty on more expensive properties although as we have seen in the past, this does tend to be a short-term phenomenon.
The likes of Savills are predicting that prime property in London will increase by 20.4% over the next five years compared to 17% for the whole UK and 15.3% for “mainstream London properties”. This would, again, suggest that many experts believe we are awaiting the next flood of foreign investment into the London prime property market. However, will this lead to a squeeze in prices above and beyond the so-called affordability factor?
Are the media misleading investors?
While for some time now there have been accusations of overseas investors pushing up the price of London property is this really the case? The so-called “prime property market” makes up just 5% of the overall London residential market and there is an argument that many of these more expensive properties have always been out of the reach of local investors. Indeed, when you sit back and look at the situation regarding London prime property this argument does in many ways stack up.
London has always been a magnet for extremely wealthy overseas investors many of whom are active in markets which could be on another planet as far as traditional investors are concerned. To use price rises in these markets to fan the flames of criticism of overseas investors does, when you sit back and think about it, make little in the way of sense.
London prime property has always and will always be in demand from overseas investors looking for so-called safe havens. Many experts are awaiting the next influx of foreign investment across the London prime property market amid suggestions that Chinese capital restrictions could seriously backfire in the longer term. Despite criticism of the London property market, where prices continue to move higher, we have not seen any signs that overseas investors are abandoning the UK capital.