Russian and Chinese buyers who helped propel the prime central London housing market to new highs have turned to cheaper neighbourhoods.
The changes mark a shift in sentiment among those looking to buy London homes as investments after purchases of multimillion-pound homes slowed sharply. Demand has remained strong in the more domestically driven market for cheaper flats and houses.
The figures, compiled by Hamptons International, the estate agent, for the Financial Times, also illustrate the lower purchasing power of those affected by exchange rate movements, such as the collapse of the rouble.
Purchases by Russians in “prime” boroughs such as Kensington and Chelsea shrank from 6 per cent of the total in 2014 to just 1 per cent in 2015. However, they rose from 2 per cent to 11 per cent in inner London areas such as Clapham, Islington and Pimlico.
Fionnuala Earley, research director at Hamptons, said Russians retained their appetite for “safe haven” London property but were buying more affordable homes after their currency was hit by low oil prices and international sanctions. “UK property is now almost twice as expensive for Russians to buy as it was at the start of 2014,” she said.
The top-end property slowdown has itself deterred buyers, with “lower projected capital growth in prime central London” leading investors to look further afield, she said.
Chinese buyers dropped from 8 per cent of the prime London total to 2 per cent, while they rose from zero to 2 per cent in outer London boroughs.
“Some overseas buyers want to have a base in London, some are investing, and some want to buy a property for their children to live in while they are studying here,” said Ms Earley.
“We are seeing those Asian buyers looking further outside the centre of town. Indian buyers have often bought in outer London and now others are following suit.”
International buyers cut down their purchases of prime central London homes altogether last year, with a 32 per cent fall in the number of transactions compared with a year earlier. This came within the context of an overall 26 per cent drop in expensive London homes changing hands, thanks to a series of factors including stamp duty increases introduced in late 2014, said Ms Earley.
There were also early signs that Russian and Chinese homeowners were more inclined to sell: in prime areas of London, Russian sales tripled as a proportion of the total, to 3 per cent; Chinese sales doubled to 2 per cent. Transaction volumes in these central areas are low, however, meaning the data may be volatile.
Middle Eastern buyers remained enthusiastic when it came to expensive central London homes, making up 16 per cent of the total in 2015 against 10 per cent a year earlier.
Ms Earley said this could also be traced back to currency movements: “Middle Easterners and others pegged to the US dollar saw London property become relatively less expensive.”
Fears of a UK departure from the EU following the June referendum were also weighing on the market in central London, the Royal Institution of Chartered Surveyors said this month.
Simon Aldous, director of valuation at Savills, the estate agent, told RICS that prices in central London had fallen about 5 per cent from a year earlier.
Ms Earley said sterling’s fall in the run-up to the referendum might make central London property look more appealing again to foreign buyers. “The best-case scenario is that people may want to take advantage of the better property prices given the drop in sterling — but the worst-case scenario is that they see sterling dropping and want to sell out,” she added.
Source: Financial Times
