London lures foreign property investors

By Daniel Thomas 2009-01-12

Foreign buyers, taking advantage of price falls and the weak pound, are flooding the London property market.

House prices have fallen by about 15 per cent for the average domestic buyer since the market reached its peak 18 months ago, according to Savills, the property consultancy. But overseas buyers are capitalising on sterling's weakness to achieve discounts of 35-50 per cent.

Buyers using euros have seen an effective price fall of 35 per cent. Those using US, Singaporean and Taiwanese dollars have even greater buying power, according to Savills, while Japanese yen investors can buy a UK property at half the price of a year ago.

Savills' estate agents report a sharp increase in the number of overseas buyers and inquiries. 8 Jan's decision by the monetary policy committee to cut rates by 50 basis points is expected to boost demand further. The last interest rate cut generated an almost immediate surge in international inquiries, according to the consultancy.

Charlie Bubear, based in Savills' Knightsbridge office, said there had been a 70 per cent rise in international buyer inquiries after December's base rate cut, particularly among French and Italian investors.

“There are a good number of cash buyers in the market, lined up with lawyers and ready to conclude fast deals. We have seen the return of the five-day exchange,” he said.

Savills' Yolande Barnes said overseas property investors had played an important part in previous housing market recoveries in central London, where most international buyers tend to focus.

Savills' records show that Middle Eastern investors capitalised most in the mid-1970s, US investors in the early 1980s and south-east Asians – particularly from Hong Kong, Singapore and Malaysia – in the early 1990s. Even in the boom years, overseas investors made up between a fifth and a quarter of buyers in the prime central London market.