London property: Political stability offers haven for investors

Niche foreign private banks are emerging as a growing force in the £1m-plus mortgage market, as they follow the huge flow of money from rich international buyers into prime London property, viewed by many as a safe haven for wealth.

Mark Harris, director of SPF Private Clients, a high-end mortgage broker, believes these new lending entrants are following the movement of global wealth to the London property market, as overseas buyers continue to snap up trophy homes in the capital.

According to Hamptons International, an estate agency that specialises in selling homes in the affluent property markets of London and south-east England, as much as 75 per cent of all purchasers in the prime London property market are now international, up from 50 per cent in 2007.

In the 18 months to June this year, a net £6bn flowed into the second-hand and new-build markets of prime London from overseas buyers.

Savills, another high-end property agent, believes this demand from wealthy international buyers is likely to continue. It is forecasting prime property values in the capital to rise 22.7 per cent in the five years to 2016, making the million-pound mortgage market appear a safe bet for many private banks.

“Prime real estate has proved itself a stable safe deposit in uncertain times and in an investment world searching for yield and security, the five-year outlook for prime property is compelling,” says Yolande Barnes of Savills.

Andrew Jackson of Butterfield Private Bank, says “we’re particularly focused on prime central London property. You don’t have to look at many of the property reports, such as Knight Frank or Savills, to see that these areas continue to increase steadily and surely in value.”

This article has been paraphrased from The Financial Times special report on Private Banking 2011, by Tanya Powley. The full article can be read by FT subscribers by clicking here.

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