Alex Smith, senior adviser and team leader, Capricorn Financial Consultancy
Despite a challenging stint for the UK housing sector, the Prime Central London (PCL) property market continues to hold its footing. The number of new prospective buyers in London rose by 12% between August and September, compared to a 5.4% decline in September countrywide, as reported in the recent Nationwide House Price Index. In prime outer London, this figure was much more modest, at just a 1.4% decrease.
Once again London has shown its worth as one of the strongest regional housing sectors in the UK – but why is the capital such a hotspot for property investment? The reasons for this lie behind a host of factors, including the motivations of London property hunters and the appeal of the capital as one of the world’s most well-known cities.
Lower reliance on mortgage financing
One of the key distinguishing factors between the PCL and broader UK market is a lower reliance by investors on traditional mortgage financing. Many of those investing in PCL properties will possess significant cash reserves, often accumulated through various means, such as inheritance or prior investments. This is reflected in data from JLL’s Prime Central London Report in July 2023, revealing that 71% of properties sold in London were purchased with cash.
A strong supply of cash means investments are protected to withstand financial shocks such as interest rate changes and economic fluctuations. And for those purchasing properties in the capital, this plays a significant advantage in today’s high rate environment for those seeking to maximise their property investment.
Strong international investment
There is no doubt that London as a city has it all to offer, which has certainly strengthened interest from international investors. Whether it’s the wide array of cultures, restaurants, iconic landmarks, sporting arenas, or museums, there is something for everyone in the UK’s capital, which makes it stand out to potential buyers on an international scale.
With 37.5 million overseas residents visiting the UK in 2023, the popularity of the city brings a surplus of demand, particularly for property in the region. With London remaining one of the world’s leading finance hubs and a major global city, there is no reason why this trend shows any sign of slowing down.
London on sale thanks to fluctuating currency valuations
As one of the world’s leading property hotspots, London has appealed to those looking to invest from overseas. Interest has been heightened in recent times by changes to property prices which have offered a compelling investment for international property-seekers.
At Capricorn, we’ve seen London garner more attention from investors in the Middle East and Asia, and we opened offices in Dubai and Shanghai this year to accommodate for this growing international demand for London real estate.
Interest from these regions has not only been strengthened by property price drops in the UK, but also favourable exchange rates. With the pound still recovering from the low points of 2022, international buyers are able to invest in the UK market at a much cheaper price, especially when compared to currencies tied to the US dollar. This increases the affordability and potential returns for overseas investors, particularly those investing in PCL property where demand is strong and prices remain more stable compared to the wider UK market.
Ultimately, the resilience of the PCL market is upheld by investors’ ability to endure economic uncertainty. Investment in PCL property has been robust since the turn of the decade, and we can expect the market to continue to outperform both the wider UK and Greater London averages as we head into 2024.
