Investment in Central London property market emerging as the safest bet

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.

Owning a house at Mayfair is the latest status symbol for India’s nouveau riche

LONDON: In a district in north-west London that is a favourite nesting ground for bankers from all over the world, a premium housing project suddenly found itself making distress sales after the recession. They sold one flat to an Indian.

“And then another, and another, and now about two-thirds of this building are owned by Indians,” says Mark Pollack, managing director of Aston Chase, a property consultant specialising in north London. They’re coming from Mumbai, Delhi and a bit from Bangalore, and though still a trickle, even tier-2 cities like Ludhiana and Chandigarh.

They’re swarming all over Knightsbridge and Chelsea with budgets as modest as £500,000 all the way up to £20 million. London’s prime property market, which has overseas buyers – mostly Russians, East Europeans and from the Middle-East – pouring in over £3.3 billion annually, is now sitting up to take notice of this new breed of Indian buyers in the mid-level segment.

These are mostly young, small businessmen and entrepreneurs, and upper middle class parents of kids studying in London acquiring their first overseas property. Astudy by top-end property consultant Savills estimates that Indians have now grown to make up 4% of buyers in prime central London, 6% by value, and have an up to 9% share in the £5-15 million range, with an average spend of £3.5 million.

Not many Billionaires

A home in Mayfair, it seems, is now a must-have status symbol for India’s nouveau riche, as well as a viable investment avenue. Says Camilla Dell, managing partner of Black Brick Property Solutions, London’s largest independent buying agency: “We’ve seen a significant shift in the past two years, more people want to buy. When people become wealthy, they like to own overseas property – a home in London is seen as a trophy asset.”

Black Brick has done £25 million in deals last year, starting from £500,000, though Dell says demand usually goes from £4 million up to £20 million. Nothing’s changed at the ultra-premium-over £15 million-segment. Says Andrew Langton, managing director of Aylesford International: “There have been a few high-profile deals, and I’d say the top 100 richest Indian families have already built up their overseas property portfolio.”

Not enough billionaires, but plenty of millionaires. The action has moved down the value chain, to the wannabe rich listers. Yolanda Barnes, head of research at Savills points out that, “Indians are an often neglected but important cohort of buyers, especially in the £5-15 million range. Out of the emerging nations, they’re more important than the Chinese.

“The Chinese haven’t quite arrived in London yet, sticking to East London and Canary Wharf with relatively low-ticket investments. While most Indians refuse to look beyond Mayfair, Chelsea, Belgravia, Kensington-prime central London-there is some drift to other areas as well, where there are established Indian communities.

Pollack of Aston Chase, which works in the Hampstead and area and has done high-profile super-premium deals in the past, says they are recently doing a lot of business in the £2-5 million range, and his clientele is “unarguably younger”. Rajan Shori of law firm Manches says his firm started the property advisory practice simply as an add-on service for Indian clients, and its success has taken them by surprise.