Domestic demand is beginning to play a more significant role in the market, but the recovery is still being largely supported by interest from overseas. CBRE’s latest findings show that 45% of all off plan sales in the Far East happened in Hong Kong, with a further 35% in Singapore.
However, the ongoing strength of the market largely depends on London remaining a globally attractive place to do business, the report points out. Despite its bad press, new taxes on wealth in the UK are unlikely to have a significant negative impact as the fundamental attractions like political stability, work/leisure mix and education remain strong.
‘International demand is likely to be further buoyed by recent turbulence in the Middle East and by rising inflation in Asia. These uncertain times make London property more attractive, even before considering the favourable exchange rates and the underlying investment credentials,’ said Jennet Siebrits, head of Residential Research at CBRE.
Despite this, there remains a fundamental shortage of supply. As a result newly built housing is being absorbed quickly into the market and premiums are being achieved above local embedded value.
Outside of Prime Central London asking prices have decreased indicating their greater dependence on national market forces, falling by up to 5% in fringe locations such as Islington and Canary Wharf.
‘As a result of the fundamental lack of supply of homes in Prime Central London, newly built housing is being absorbed quickly into the market and premium prices are being paid above the local embedded value,’ said Siebrits.
‘While the recovery in Prime Central London has largely been spurred on by international buyers, domestic demand is beginning to play a more significant role reflecting growing sentiment in the City’s financial services industry and its associated bonuses,’ she explained.
‘London is still seen as a place to do business thanks to its economic and political infrastructure and these fundamentals will underpin the capital’s desirability despite new Government policies in response to anti banking sentiment. London is now the billionaire capital of Europe with over 32, more than half of which are foreign, opting to make the city their home,’ she added.
