Conditions in London in 2018 could suit long-term foreign investors

The negative growth and drop in asking prices seen in London’s luxury property market in 2017 could favour foreign investors buying there in 2018 for the mid to long term, in particular those using dollars or euros, said Spot Blue in January.

Analysts forecast that Sterling has little chance of recovery against key currencies, at least significantly, until the UK has formerly left the European Union on 29th March 2019 and the country has a clearer picture of the terms of Brexit and its future trade agreements.

“Until Brexit has occurred, international investors funding London purchases with euros or dollars should take advantage of Sterling’s comparative weakness,” said Julian Walker, director at Spot Blue. “Of course, there is no guarantee, but current market sentiment is that Sterling will remain undervalued for some months yet and will start regaining value steadily towards the end of this year, as the implications of Brexit unfold.”

Looking at property values, recent research by an upmarket estate agency reflects the general mood, revealing signs of a shift towards recovery mode in the Prime Central London (PCL) market. Knight Frank’s December report shows an average price fall of just 0.7 per cent year-on-year in this sector, although in the £5m-£10m segment prices actually rose by 1.9 per cent. This is the slowest rate of decline since June 2016 and a significant turnaround compared with the seven per cent drop recorded in mid-2017.

Another leading voice in London’s market has forecast that prices in prime central areas, typified by the districts of Kensington, Chelsea, Belgravia, Mayfair and Knightsbridge, will begin to recover towards the end of 2019. With recovery in full swing, the Savills’s report also predicted 20 per cent growth over the next five years in the capital’s luxury property market.

“Another sign that the worst could be over is that 40 per cent of £2m properties underwent a price reduction in the year to November 2017, according to Rightmove research,” continued Mr Walker at Spot Blue. “This figure was 29 per cent for properties above £5m. It’s fair to say that the PCL market has just about bottomed out and the adjustment after the introduction of the higher rates of stamp duty have filtered through.”

A further boost comes from this month London being voted as the number one global city for real estate investment in 2018 by members of the Association of Foreign Investors in Real Estate (AFIRE). In second place is New York, followed by Berlin, Los Angeles and Frankfurt. This is an improvement on London’s third position in 2017.

Edward M. Casal, AFIRE’s chairman, and CEO for Global Real Estate at London-based Aviva Investors, commented. “A year later, foreign investors are less concerned about the ramifications of Brexit. At the same time, the London market has been buoyed by several large sales over the last year. London has a number of attributes as a location for investment, including a stable rule of law, transparency, and use of the English language. In addition, a favorable time zone for international business, deep labour pool, and cultural attributes also help.”

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