London: Going global since 1973
05 July 2012
London’s influence as a global city has been growing for the past four decades. A new World in London report from international real estate adviser, Savills examines the importance of international buyers in the resale and new development markets of this global city.
- International buyers account for 34% of all sales in prime London, up from 27% in 2007
- This reflects London’s cosmopolitan nature; 35% of Greater London residents were born overseas
- 66% of prime London’s overseas buyers live and work in London and were buying their main residence
- International buyers account for 65% of buyers in new development market, a reflection of strong overseas marketing campaigns
- Western Europeans (particularly French and Italians)have the biggest market share after UK buyers; 15% of resale, 8% of new build sales
- Top spenders are Eastern European and CIS (ex Soviet Union) buyers; average spend £5.7m in resale market, £7.2m in new build
- Chinese and Pacific Asian buyers a significant buying group in the new build sector with 31% market share vs 5% in the resales market
- International buyers outnumber sellers by 2:1 and Russian, French, Italian and Chinese are biggest net investors
- UK owners are now the biggest net sellers and amongst international buyers only N Americans, Swedes and Irish sold more than they bought in 2011/12
London, where 35 per cent of residents were born overseas, ranks as one of the world’s most cosmopolitan cities and the globalisation of the city’s prime London residential market continues to grow and evolve as its population becomes ever more diverse.
The value of prime London residential stock rose by £21 billion in the year to the end of June 2012, although at a slower rate than in previous quarters, as international home buyer and safe haven investor confidence in the UK capital continued.
Homes– not just safe deposits
Latest estimates from Savills research put the net inflow of international cash into prime London at over £18 billion since 2007. In the past 18 months international buyers have increased their spending, accounting for 34 per cent of sales in volume terms and 49 per cent by value, up from 24 per cent and 37 per cent respectively in 2007. But, says Savills, the rate of overseas uptake during the domestic-purchaser boom of the mid noughties was low by historic standards and London has seen over one-third foreign purchasers many times before.
“There are perceptions that international buyers have turned swathes of prime London into dormitory areas, but our research explodes this myth,” says Yolande Barnes, head of Savills residential research. “The majority of overseas buyers are seeking homes rather than pure investments. Two-thirds of international buyers in the resales market live and work in London and are acquiring their primary residence. In prime central London the figure is just under half (46%), in prime south west London 83 per cent and prime north London 79 per cent.”
Overseas buyers are especially important to the (relatively small) new development market. They now account for 65 per cent of new build sales across prime London, rising to 70 per cent in prime central locations and 78 per cent for new build properties over £5 million. “This buying provides much-needed certainty on funding for new schemes and often supplies new rental stock in all price brackets as 53 per cent of buyers are landlords. In short, this means that the majority of properties acquired are occupied full time by tenants,” says Barnes.
International owners are buying more than they sell
The result is that international buyers have become net investors, with international buyers outnumbering international sellers by a factor of nearly two to one. Russians, Italians and French are the top three net investors, while Chinese buyers stand out as a growing group, now the 4th largest net purchasing group but almost entirely concentrated in new build properties.
UK buyers were the largest net sellers by volume, with1.2 UK sellers for every UK buyer in the past 18 months, while Irish, Swedish and North American owners are the top international net sellers. This in part reflects the maturity of these national groups in the London market, and occupiers from these countries are well established and regularly sell as well as buy.
“The globalisation of London is not a new phenomenon,” says Yolande Barnes, head of Savills residential research. “We expect the proportion of prime overseas buyers to continue to fluctuate between 25 per cent and 40 per cent according to market, currency and global conditions, but they will without any doubt remain an important market force.”
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