Investors look to prime London property as safe-haven asset

Investors look to prime London property as safe-haven asset
Chris Ratcliffe/Bloomberg

The number of offers accepted on one estate agent’s prime London property book last month was the highest figure in a decade as investors look more closely at safe-haven assets and international travel resumes.

The spike in activity, which was stronger than in the final months of the stamp duty holiday in 2021, was recorded by Knight Frank. 

The firm said exact figures were commercially sensitive, but that the record uptick points to a growing investor appetite for higher-value property in the capital.

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Last month, fellow estate agent Savills reported 294 sales of homes worth £5mn or more in the six months to the end of June, 2022, the highest level of sales it has ever recorded for this type of property.

Knight Frank’s UK residential research head Tom Bill said one reason for the surge in sales is due to a change in investor appetite following the volatility of stock markets for much of this year.

“There is a creeping sense that investors are looking more closely at safe-haven assets, which has traditionally benefitted the prime London property market,” Bill explained.

“Investor nerves have been clearly on display in 2022 as central banks attempt to avoid stagflation. After steep declines this year due to a strengthening US dollar, the gold price has risen modestly since mid-July against a backdrop of geopolitical tension.

“There are risks for the market on the horizon, but they are not yet looming large.”

Bill also put the increase in prime London property sales down to an uptick in international travel, making the market more attractive for international investors, as well as for those keen not to be tied down solely to the UK.

International arrivals at Heathrow in June were down 17 per cent down on the same month in 2019, compared to an equivalent drop of 87 per cent last June.

Bill said prime London markets are “relatively good value” as buyers continue to reassess how and where they live after Covid. 

“While all the attention was on the escape to the country trend during the pandemic, price growth in London was lacklustre, even after six subdued years. Average prices in prime central London are still 15 per cent down on their previous peak seven years ago.”

Rising mortgage rates have weighed on prime prices more recently. Average price growth in prime central London was 2.8 per cent in the year to July, and 5.2 per cent in prime outer London.

But Bill said prime London markets are likely to be “more insulated” from rising borrowing costs than other UK locations due to higher levels of affluence.