Are Luxury London House Prices Falling?
The West End of London has long had a reputation for exorbitant wealth and opulence. A reputation that was substantiated last week by the sale of an 11ft by 7ft run-down car garage in Chelsea that was sold for £550,000. That’s more than double the UK average house price stipulated by Rightmove of £271,669. In fact, a combination of a stronger pound against the dollar and increased office rental costs have recently seen London leap-frog Hong Kong to become the world’s most expensive city. The stronger pound and the threat of the mansion tax has also meant, however, that London’s premium properties have increased by only 3% this year compared to the 41% appreciation since the financial crash of 2008…
… So, is the luxury london property bubble about to burst? And what does that mean for the rest of us?
There has, after all, been compelling arguments that suggest that London’s luxury developments are responsible for saving the UK’s mainstream housing market. London is home to more millionaires per capita than any other city in the world and has more billionaires, 72, than any other city in the world, edging out New York and Moscow. The recent crisis in Ukraine, moreover, has seen even more Russian – and Ukrainian – capital flow into London amid fears of international sanctions.
The aforementioned increase in the strength of sterling and threat of a mansion tax, alongside a number of other economic and policy changes threaten to change the way business is conducted in the capital. To continue, this could potentially reduce the number of foreign investors in London as they seek out more fertile cities and emerging markets worldwide. There are economists and academics who believe London’s property market could unravel, but there are also those that believe domestic concerns in other countries could sustain or even increase the amount of money pouring into London, mostly from Asia. Either way, the UK housing market as a whole remains inextricably linked to events occurring in London so we will all be affected. How things will unfold is still unclear, only time will tell…
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