Foreign buyers to cash in on 7.5% prime property slump
Prime residential property prices in London are being depressed by fears over a deepening recession, as value during October and November fell a record 7.5%. However, the market may be buoyed next year by foreign buyers seeking a bargain.
November saw the second steepest falls on record for property valued at over £10m (€12m), superseded only by the previous month, which suffered falls of 3.9% in value according to the latest Knight Frank Prime Central London Index.
Prices are now 14.1% lower than last year, and have fallen by a total of 9.3% over the last three months alone.
The report said one outcome of falling property value combined with the weak sterling is that more foreign buyers are interested in buying prime property in London.
Liam Bailey, head of residential research at Knight Frank, said: “These dramatic falls may be painful to vendors, but prime London property is increasingly looking like very good value, particularly to foreign buyers who also benefit from the weak pound."
He added: "A fall of 15% may translate to a fall of as much as 35% to someone watching the market from the USA, as the pound has fallen by 20% against the dollar since the beginning of the year. There has been a increase in interest from such buyers over the past few weeks, which has not yet been translated into activity."
He said this could be why November's fall was slightly less than October's fall of 3.9%, as vendors become more realistic about value and more properties are sold.
Charles McDowell, who runs his own high end property search agency, said he has recently seen a surge of interest from foreign buyers for prime London property.
He said: "Particularly for Euro-domiciled clients, it makes sense at the moment to buy London property in Kensington, Belgravia and Chelsea amoung other prime areas. Many will buy in 2009, possibly towards the middle of the year when they expect values to fall to their lowest."
Prices for prime central London property have now been falling for eight consecutive months and annual growth now stands at -14.1%, the lowest rate since the index began in 1977.
Bailey said this recession is affecting property prices much worse than the 1990's downturn: "In June 1990, at the height of the last slump, the annual fall amounted to just 10.6%.
He added: “In previous months we noted that super-prime properties had remained immune from the downturn, and that houses were performing better than flats. Neither of these trends have continued into the final quarter of the year.
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