Is time up for the London property market?
The London property market has been one of the star performers around the world over the last decade with current prices way above and beyond the previous high of 2007. Some optimists believed that the luxury London property market would continue to rise indefinitely with wealthy overseas investors clamouring to get their hands on some of London’s most sought-after addresses. However, political and economic unrest in Russia seems to have given many wealthy Russians a severe dose of reality.
Russian investors concerned about the future
There have been a number of reports over the last few days suggesting that Russian real estate investors are leaving London en masse. The major problem seems to be in the area of properties worth around £5 million with many Russian investors keen to sell up and repatriate funds to cover losses in their homeland. The situation is slightly different for extremely wealthy Russian investors, with properties worth £20 million and above seemingly still much sought after by the cream of the Russian investment arena.
The ongoing collapse of the ruble has prompted a significant backlash from not only the Russian population but also the political elite. President Putin has time and time again blamed the West for Russia’s woes although this does seem to be wearing thin amongst the general public. The situation is so bad in Russia that many overseas companies are unwilling to display prices for popular products because of the massive fluctuation in the exchange rate.
Quote from PropertyForum.com: “The UK property market is often dominated by London which is head and shoulders above the rest of the UK real estate sector. If you dig a little deeper, you will see that while there has been a general recovery in UK property since the 2008 worldwide recession the rate of growth is nowhere near that seen in London.”
Is this really a concern for the London property market?
While it would be wrong to suggest that the London property market has depended totally upon Russian investors there is no doubt they have more than committed their fair share of investment funds over the last few years. London is a market which attracts wealthy individuals from around the world and it just happens that over the last decade much of the investment in the real estate sector has emanated from Russia. If prices were to fall significantly it would be surprising not to see other overseas investors taking advantage because while the short to medium-term outlook is mixed, the long-term attractions of London still remain.
It will be interesting to see how agents react in the short to medium term, whether we see any signs of panic and whether indeed there is underlying strength as many believe. The situation in Russia is likely to get much worse before it gets significantly better and this could well lead to a growing number of Russian investors selling their overseas assets and repatriating their funds.
Who might be the next saviour of the London property market?
While the last decade has reflected significant interest from Russian investors towards London property there are other areas of the world which have prospered of late. South America is one such area with the overall economy performing significantly better than the rest of the world during these difficult times since the collapse of 2007/8. Whether indeed we will see an increase in South American investors operating in the London property market remains to be seen but this is certainly an area of extreme wealth across a focused group of individuals.