Investment in Central London property market emerging as the safest bet

18 June 2012, Economic Times (India)

Forget bunds, gilts or gold. London prime central residential property is emerging as the safest of all safe havens. If you want to know where those in the know put their personal savings, just talk to a real estate agent in London.

First it was the Greeks, then the Italians, and now, it seems the election of socialist president Francoise Hollande has sent super rich French scurrying to the safety of Belgravia and Mayfair. Almost all say agents say they’re seeing a rush of French buyers these days, wary about Hollande’s anti-rich policies. Not to mention Indians.

Interest from Indian buyers has jumped in direct inverse correlation to the drop in business confidence. Says Camilla Dell, of buying agents Black Brick, which works with high net worth Indians looking to invest in London property: “There’s a sharp increase in wealthy Indians choosing to go offshore and become NRIs. We’ve had a surge of enquiries in the past few weeks since the credit rating downgrade.”

London prime central residential property doesn’t follow the rules of the rest of the UK, or even the rest of London. According to a study by independent analysts Fathom Consulting, The average price of homes across these areas is £1.2m – almost six times the national average.

In the four years from late 2007, their value rose 30% faster than the London market and 34% faster than the UK market. “If there was a Mayfair index, it would be a bellwether for performance global asset classes for wealthy investors around the world,” says Gita Nayyar, a veteran from wealth management industry, now based in Mumbai.

According to a report by the Institute of Public Policy and Research, overseas buyers pumped GBP5.2bn into London property in 2011, £1.5bn more than in 2010. A study by Clarendon Capital, a new fund that hopes to cash in on the prime London boom, London prime central has consistently outperformed both gold and the FTSE over a period of 15 years.

“It’s seen as safe, and for investors who are looking to transfer their capital from risky markets into a viable asset, buying prime central residential property is an ideal option,” says Sayu Sinha, fund manager at Clarendon. A study by Clarendon House Capital shows that prime central London property prices have outperformed the FTSE by 164% , and Gold prices by 16% over the period January1995 to April 2012″.

The area around Belgravia, Mayfair, South Kensington, the heart of what’s called prime central, with an arm stretching out to St Johns Wood, Chelsea and Regents Park, is more or less in the prime central region.

It’s always been popular with Russians and Middle Eastern buyers, and in the last 18 months or so, with buyers from troubled Europe – Italians and Greeks — seeking to transfer their wealth to safer shores. Despite a hiccup – or three – with the UK’s last budget imposing a punitive 15% stamp duty on properties over GBP 2 million, business is back to usual in this rather unusual property market.

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