As the eurozone lurches from crisis to crisis and Greece teeters on the brink of default and exit from the euro, the number of wealthy Europeanproperty buyers in London has surged. Greeks, Italians, Spaniards and even the French are desperate to convert their euros into bricks and mortar in the capital.
There are three main safe havens now, said David Adams, managing director of Mayfair estate agents John Taylor – gold, the Swiss franc and London property.
Upmarket estate agency Savills has seen web searches from Greece jump by 50% compared with six months ago. Searches from France are up 16%, from Spain 10% and from Italy 9%.
Lucian Cook, director of residential research at Savills, said: “A lot of the early recovery in the housing market [since the first wave of the credit crisis] was triggered by foreign exchange plays, but in recent times this has been replaced by a safe haven effect.”
Prices for prime central London properties have risen nearly 50% since a post-credit crunch low in March 2009 and have just hit a record high – more than 12% above their previous peak in March 2008 – according to estate agency Knight Frank.
Even the falling value of the euro in recent weeks, hitting four-year lows against the pound and so making property purchases more expensive, has failed to put off wealthy Greeks and other euro buyers desperate to park their money somewhere safe.
London has always been popular for its liberal legal and tax regimes. Continued interest from Middle Eastern and Asian, in particular Chinese, investors in central London is also pushing prices higher. Gary Hersham, managing director of Beauchamp Estates, a specialist in luxury property, has had several inquiries from Greek buyers over the last six months. He expects a significant jump after the forthcoming Greek election. “You need to phone me back after the elections on 17 June, then we’ll see what happens – we’ll see a hell of a lot of people [moving from Greece to London].”
Hersham said Greeks have been long attracted to historic London properties in Mayfair, Knightsbridge and South Kensington, but interest has grown from other countries. “I’ve also seen a lot of Italians and quite a few Spaniards,” he said. “Italians have lost faith in how Italy is governed and are escaping the country. Lots of French people are also escaping [François] Hollande. Our French office has taken lots of instructions since the election.” France’s new president has said he intends to raise taxes on the wealthy.
Richard Davies, the head of residential property at upmarket estate agents Chesterton Humberts, said: “Italian and Spanish buyers have been noticeably active in the London property market since the first cracks in the eurozone started to show back in 2009. In 2010, Berlusconi introduced a tax incentive that encouraged a lot of Italian buyers into London. In some offices, one in four sales was made to Italians. Since then, there has been a steady stream of eurozone buyers, many of whom work as professionals in the City. Before the budget, there were some noticeable purchases of blocks of flats in Kensington by Italian buyers.”
Theodore Angelopoulos, a Greek shipping magnate, bought the Old Rectory in Chelsea in 1990, which until recently was London’s largest and most valuable residential property. It is thought to have been the first property in London to go for more than £10m.
Nigel Lewis, property analyst at PrimeLocation.com, where traffic from Greece has surged by 40% in a month, said: “Greeks are in the top five euro nations [buying in London]. They were the trailblazers in the 70s, 80s and 90s and as the economy got worse and worse more high net worth individuals have been moving to London.”
Like Russian buyers, Greeks have been after trophy houses in west London where they can throw lavish parties and hold business meetings, but live for only a few weeks or months a year. “Greeks stick to what they know but when they get to know London, they move up to St John’s Wood and Hampstead,” said Lewis.
Mike Warburton, director of tax at accountants Grant Thornton, acts for many buyers from overseas. “It happens to be Greeks at the moment,” he said. He raised concerns that the boom in foreign buyers is pricing out ordinary Londoners. “I do feel for the people that provide services for people lower down the chain. How do the nurses and secretaries get to live in London?”
In Mayfair, Adams said he had been “overwhelmed with Italian buyers all looking for two-bedroom apartments in the £1m to £2m bracket”.
Stamp duty changes announced in the March budget mean that houses worth less than £2m are selling like hot cakes. Homes worth more than £2m now face a stamp duty rate of 7% – 15% fif bought through a company. This punitive rate closes a loophole that allowed wealthy individuals, including Sir Mick Jagger and Ringo Starr, to avoid stamp duty.
In April 2011, the actor, comedian and writer John Cleese said London was no longer an English city. This week, a report from Fathom Consulting commissioned by property developer Development Securities found more than half of the resident population of Westminster and Kensington & Chelsea – housing the bulk of the prime residential property market – are from overseas.
Since 1995, safe-haven flows have boosted house prices in prime central London locations by more than 30%, the study says, driving up the average price of homes to £1.2m – almost six times the national average.
But Fathom Consulting warned that if Greece leaves the euro and the currency bloc collapses, house prices in London’s glitziest areas could fall by up to 50% over the next five years. Funds would be repatriated to continental Europe and after currencies had depreciated, property in Frankfurt, Paris and Rome would start to look very cheap.
Naomi Heaton, the chief executive of property investor London Central Portfolio (LCP), and estate agents poured scorn on this gloomy prediction. “If there is any wall of cash coming into London it’s going to be Chinese money, not European money,” she said.
Adams added that even at the height of the financial crisis in 2008, London property prices did not halve, and they recovered from their falls the next year.
According to Savills, western Europeans and Scandinavians have been the biggest buyers of prime central London property over the past five years. The Middle East and north Africa are close behind, as are eastern Europe and the former Soviet Republics.
W2, SW3 and W8 are the most popular postcodes for investors, according to LCP. The choice of postcode reveals different investor profiles, explains Heaton. SW3 (prime Chelsea and Knightsbridge) represents a flight to quality in an unpredictable global and economic environment. W2 (Paddington, Bayswater and Notting Hill) is young, buzzy and well linked to Heathrow airport, the City and Canary Wharf and has exciting growth potential. W8 (Kensington) is a prime, historically expensive area, with south Kensington and its environs (SW5 and SW7) surging in value.
Source : http://www.guardian.co.uk/uk/2012/jun/01/london-property-stable-investment-europeans