Introduction
In recent weeks, many investors have inquired about the current viability of investing in the London residential property market. Throughout my career, I have witnessed significant growth in the value of prime residential properties in London, primarily driven by strict planning regulations limiting new property supply and sustained demand from foreign buyers seeking secure investment opportunities.
Historical Perspective
To illustrate this point, consider a house in Knightsbridge that I sold for £1 million in 1984. Today, this same property is valued at £23 million. Over the same period, the value of the FTSE 100 index has only increased fivefold. In an open letter published in the Financial Times on January 29, 2009, I highlighted that foreign investors are attracted to prime London properties for several reasons, including the UK's political stability and a robust legal system that protects foreign ownership.
Current Market Challenges
Despite the enduring appeal of the prime London property market, it is essential to consider whether it will continue to attract an increasing number of foreign buyers to sustain price growth. Recently, buyers have found it increasingly challenging to find properties that represent sensible value. For example, an asking price of £11 million for a four-bedroom apartment in a new development on Bayswater Road, a second-tier neighborhood in Central London, is difficult to justify.
Future Outlook
Given that London property prices have now surpassed those of most other major cities, a cooling-off period in demand from foreign buyers is likely, potentially leading to prolonged market stagnation.
Advice for Investors
Therefore, my advice to investors is straightforward: while it is generally a good time for long-term investors to purchase property in London, it is now more important than ever to wait for the right opportunity and invest only in properties that offer sensible value. Investors should avoid purchasing properties at inflated prices solely in the hope of profiting from a perpetually rising market.
