Billionaires in battle to buy London's best homes

Billionaires in battle to buy London's best homes


Foreign buyers are pushing house prices in the capital to melting point, says Graham Norwood

Sunday April 22, 2007
The Observer


It could be the stuff of World War III: Arabs, Americans and Russians trying to outfox each other and seize control of valuable land. A new terror crisis? A stormy session of the United Nations? No: this is a typical scene from central London's super-wealthy and overheated housing market, where the rich and famous compete for the rarest of commodities - a perfect property in a prime location.
The whole of the London property market may be hot at the moment, with the average asking price nearly £379,000, according to property website Rightmove, but central west London - from Kensington and Holland Park in the west, through Bayswater to the north of Hyde Park, past the mews of Mayfair and Knightsbridge and down to Belgravia and Chelsea in the south - is at melting point.
According to Rightmove, in Kensington and Chelsea average property prices have soared by £120,000 to £1,329,878 in the past month and by £620,000 in a year.
There are two reasons for this extraordinary increase: the first is pure economics: there are far more wealthy buyers than there are homes for sale. The second is status: when the world's wealthiest buyers want to add another prestigious address to their real estate portfolio, they look to Pimlico rather than Paris, to Marylebone instead of Manhattan.

'London has what the world's richest people want - security,' says Charles Peerless of Winkworth estate agents. 'It speaks the new universal language of English, has an easy air hub at Heathrow, good schools, a welcoming tax regime for foreign owners, and the world's financial capital in the City.'

In the past year Peerless has visited Singapore, Dubai, the US and (three times) Shanghai, to explain London's property market to wealthy would-be buyers.

'The number of high net-worth individuals (HNWIs) is expanding more rapidly in North America than in Europe for the first time since 2001, while Singapore, South Africa, Hong Kong, India and Australia have seen the highest growth in HNWI numbers,' explains Liam Bailey of Knight Frank, an estate agent that at any one time has about 300 of London's most expensive homes on its sales books.

Bailey says Britons now buy only half of the most expensive homes in prime central London, where apartments routinely cost over £1m and houses usually over £2.5m. That share drops to just 40 per cent of the 'super-top-end' homes costing more than £4m.

The surge in overseas interest means central London's market is the hottest in the country and now operates to totally different rules to those of other major cities in the UK. For one thing, foreign buyers don't have a home to sell in London, so they add to demand without helping to maintain supply. Therefore prices go up faster and competition intensifies.

Another issue is safety. 'Security is key,' says Peerless. 'Although fear of terrorism has eased, there's a lot of concern that any property lived in by a wealthy buyer's family must have the security associated with exclusive new developments in the very prime areas of London - CCTV, direct access from underground car parks to flats, and so on.'

The underlying economic attraction of London has rarely been stronger. City bonus payments this winter have hit £8.8bn, of which about 60 per cent will be spent on property, mostly in London. Oxford Economic Forecasting, a consultancy, says the City's financial institutions - where average annual pay is already over £120,000 - will add another 12,700 to their staff by late 2007.

Over 65 per cent of Fortune's Global 500 companies, a key barometer of the world's financial operations, have chosen London as their European or world headquarters, and the capital has more foreign banks than any other city.

So where does this leave British buyers in the capital?

'Wealthy Brits buy a small mews house or pied-a-terre in London, then have a main house or estate in the country,' says Robert Bailey, who believe the summer will see another influx of foreign buyers just as domestic purchasers start their holidays.

'If Britons want a substantial house in the capital, they'll probably find themselves relegated to south London - Battersea, Wandsworth or Clapham,' suggests Bailey.

'These are lovely houses, of course, but a little further away from the action in the centre. That's where the rest of the world is.'

Where the money is

Belgravia

Property: It doesn't get much grander than this - think big, then bigger again. Gleaming squares and terraces

Typical house price: £1.8m to £9.2m

Overseas interest: Russian, Middle Eastern, titled European

Westminster

Property: Mixed - from Georgian terraces to modern in-fill

Typical house price: £1.5m to £5m

Overseas interest: Italians favour St James's

Pimlico

Property: Long white terraces, great for flats and pied-a-terres - some say it is Belgravia's poor relation

Typical house price: £1.2m to £2.4m

Overseas interest: European high rollers working in the City

Mayfair

Property: Money, history and style means big houses

Typical house price: £2.4m to £4m

Overseas interest: French, American, Middle Eastern

Marylebone

Property: Mixed - Georgian terraces, Edwardian mansion blocks, some studios

Typical house price: £3.7m to £4.6m

Overseas interest: British landlords who have mainland Europeans as tenants

Fitzrovia

Property: Lots of small flats converted from 18th century terraces, squares and mansion blocks

Typical house price: £1m to £3.7m

Overseas interest: British landlords but a bohemian European rental population

Soho

Property: Dense maze of Georgian and Victorian streets with charming residential enclaves

Typical house price: £1.4m to £2.1m

Overseas interest: London's gay quarter attracts Chinese and French buyers too

Covent Garden

Property: Soho's smarter neighbour - lots of flats above shops and restaurants

Typical house price: £1.4m to £2m

Overseas interest: US buyers and renters

Chelsea

Property: Georgian, Victoria, Edwardian and post-war estates

Typical house price: £2.3m to £3.7m

Overseas interest: Global - everyone knows the name Chelsea

Kensington

Property: Tall Victorian houses and flats and more flats

Typical house price: £1m to £3.7m

Overseas interest: American and French

South Kensington

Property: Huge white terraces converted into flats

Typical house price: £1.1m to £3m

Overseas interest: American and French

Knightsbridge

Property: Apartment blocks, large terraces, mews houses

Typical house price: £1.8m to £3.7m

Overseas interest: Middle East, Asia, North America and Europe

Holland Park

Property: One of London's largest concentration of houses - solid Victoriana

Typical house price: £3.7m to £5.5m

Overseas interest: Americans, in droves

Notting Hill

Property: Large houses in well-planned squares and terraces, with flats aplenty

Typical house price: £1.3m to £2.7m

Overseas interest: Americans and Europeans like its space and sense of community

Bayswater

Property: Smart family houses amid cheap hotels and flats

Typical house price: £900,000 to £2.2m

Overseas interest: Middle Eastern