Big Discounts in Prime Central London Spur on Demand from Foreign Investors
London, 9 November - CB Richard Ellis' latest UK Residential ViewPoint indicates that constricted supply and increasing demand from foreign investors will insulate Prime Central London from the volatility in the wider residential property market and could lead to continued growth going forward.
Since August 2007 house prices in Kensington and Chelsea have fallen 8% in Sterling, but for buyers with foreign currency the weak Sterling has led to sizeable discounts. The strength of the Japanese Yen has resulted in a 40% discount over the same period, while buyers with Euros have seen falls of 29%.
Jennet Siebrits, Head of Residential Research at CB Richard Ellis commented:
“The Prime Central London market is likely to benefit from sustained demand going forward from foreign investors, as evidence suggests Sterling could remain weak well into 2010. Drivers of this include lower than expected inflation, the ongoing low interest rate environment and the UK’s substantial budget deficit, which will limit Government spending.
“We are also expecting the return of ‘bonus buyers’ and high net worth individuals to the Prime Central London market, which is particularly encouraging for Kensington and Chelsea as this area has traditionally seen high proportion of investment from city money. However, ongoing unemployment uncertainty coupled with the rise in income tax and the Government’s threat to cap bonuses could stifle demand and limit recovery in the second quarter of 2010.
“Despite improving demand, transactions are down 55% in Kensington and Chelsea and 60% in Westminster compared to pre-crunch levels. This can be attributed to the severe constriction in supply, which is partly the result of the limited availability of development finance. There are currently only 45 units under construction in Kensington and Chelsea, which is indicative of the extent of the problem.”