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Foreign Investors are Helping Maintain High Property Prices in London

By +Eric Jafari

Foreign Investors Are Helping Maintain High Property Prices In LondonForeign investors are helping to prop up London residential development according to research from Jones Lang LaSalle. The broker revealed figures suggesting that half of London's new-home buyers are international investors tempted by the capital's reputation as a safe haven.

More than £3 billion was spent by overseas investors on new houses in the city in 2012, an increase of 25 per cent on figures from 2011.

"The London development market would be more challenging without demand from international investors," Adam Challis, head of residential research at Jones Lang LaSalle, said.

"Since development funding from banks declined due to the market downturn, international purchasers have provided a vital lifeline to maintain supply."

The continued investment in the city from outside investors has helped maintain its reputation as a safe haven. House purchases from overseas investors has caused prices to rise in the city, despite weakness in the housing market across the rest of the UK.

House prices increased by 10.6 per cent in the year to March, lead by a 38.7 per cent increase in the City of Westminster. However, only about one in seven foreign buyers of London properties actually live in the houses, the rest consider them as investments and gain rental income from them.

"Without international investors, most residential developments in London wouldn't happen and the housing crisis would be even greater," Mr Challis said.

In addition, a decline of the pound has helped to attract more investors due to favourable rates. Research from Knight Frank revealed that the weak pound is enticing foreign buyers. It found that prime London homes for US-dollar denominated buyers are currently seven per cent below their 2008 peak.

US buyers could continue to see a significant discount on London property in the next five years. In comparison, European investors are facing rising London prices, with values rising by nine per cent for euro-based investors.

Nevertheless, while the pound remains weak, demand is expected to increase from overseas investors outside Europe.

13 May 2013

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Eric Jafari,London residential development,international investors