London prime property prices booming

At a presentation last April by the upmarket estate agent Knight Frank, a prediction of where prime property prices might be heading for in the most desired neighbourhoods in London was made.

Liam Bailey, head of research at the property group, said he could imagine prices reaching incredible heights in the year ahead. His exact words were: “Given that top properties were selling for around £1,000 (€1,149) a square foot around a decade ago and that those same properties could now achieve £6,000 a square foot, it’s entirely possible that we will see levels approaching £10,000 soon.”

That would mean that a 1,000 square foot (304.8 square metre) apartment in an area like Knightsbridge could sell for as much as £10 million. Of course, that apartment would have to be in a state-of-the-art new complex with all the latest technological wizardry and security features. But the predicted price still looks incredible.

Or does it? The fact of the matter is London’s best properties continue to achieve mind-blowing prices, seemingly obvious to the euro-crisis, riots and tougher tax regimes.

These events, if anything, have fuelled demand, with the top London residential property prices booming, as investors looking for safe havens from the turmoil in other asset markets plough money into apartments and houses in areas like Knightsbridge, Kensington, Chelsea and Notting Hill Gate.

Research from Knight Frank confirms the view that London’s prime property is increasingly seen as a safe haven for investors, rather like gold and the Swiss franc have been.

Bailey says the ongoing uncertainty in the global market, and in the eurozone in particular, has “pushed more buyers into the central London market”.

Giles Hannah, director of sales for Europe at Christie’s, reckons scarcity of quality properties continues to drive up prices in central London and he’s predicting up to a 25% rise in the price of luxury properties over the next three years.

“We are also expecting new price records to be set, exceeding the current rate of £6,000 per square foot. Scarcity will drive the market forward and there will be a fight for quality property,” he says

Charles McDowell, a property finder for the capital’s wealthiest buyers, agrees. “The world is divided between the haves and the have-nots,” he says. “The people who have want to buy in Kensington and Chelsea.”

Research from another upmarket estate agent, Savills, has revealed that foreign investors have invested nearly £6 billion into residential property in the last 18 months.

This demand is prompting a race to buy prime London property locations ripe for redevelopment, as developers the Candy brothers achieved with Number One Hyde Park. Apartments there were the first to achieve £6,000 a square foot.

Billionaire entrepreneur John Caudwell is reportedly paying £150 million for a carpark in Mayfair in order to redevelop it into luxury apartments. And European hedge fund Orion Capital Managers plans to build one of the most expensive housing developments in Chelsea.

So, that £10,000 price tag doesn’t look that far-fetched given that London continues to attract the world’s super-rich to its smartest neighbourhoods and housing stock.