London is a truly global city and its prime residential markets are frequently influenced by the economic performance of countries around the world. Across all prime London, one third of buyers are from overseas and more than half of these buyers live and work in the city.

The influence of international wealth is not a new phenomenon. Since we began recording the data in 1980, buyers from overseas have been a key driver of the prime market. What has changed is the mix of buyers coming to London. Whereas in the 1980s, we saw lots of Americans, today there are greater numbers of buyers of Asian origin.

Where next?

To understand where the next group of buyers might come from, we have looked at data by Wealth-X on ultra-high net worth individuals (UHNWIs). An increase can be a good indicator of potential investment in London due to more discretionary wealth. However, strong-growth markets at home may mean prospective buyers stay put to take advantage of their own property market.

North Americans do exactly that, and therefore we do not expect to see an increase in buyers from this region. On the other hand, Latin Americans invest two thirds of their wealth out of their home market in favour of property north of the border in the USA. We have yet to see Latin Americans buying in London but, should they look further afield, London could benefit.

The number of UHNWIs in Asia is also set to increase significantly as their strong economic growth continues. Many of the key cities (particularly Hong Kong and Singapore) are experiencing price falls in their own real estate markets. This is likely to curb their desire to invest in property in the short term, regardless of where it is located.

Click Table 2 below to enlarge

Domestic wealth

Overall, we expect to see a slight fall 
in the proportion of international buyers in London but this will be met by an increase in buyers from the UK as the domestic economy continues to strengthen.

In July 2014, the UK’s economy finally regained its pre-crisis peak level of output after a gap of six years. In London, the economic recovery has outpaced the rest of the UK. In 2013 it generated 24% of the UK’s GDP and is forecast to account for 27% of the growth in GDP over the next 10 years.

Which industries?

London is famous for its financial industry, which vies with New York City as the financial capital of the world. The financial and insurance industry is responsible for generating a large part of London’s output, contributing 20% of the capital’s GVA (gross value added) even after last year’s 1% fall. In the prime residential markets, buyers from this industry play a vital role as the largest buying group across London, accounting for nearly half of all purchasers.

In second place is the professional, scientific and tech industry, which saw an increase of 12% over the past year and now contributes 12% of London’s total GVA. This follows London establishing itself as a world leader in the tech industry. Growth in this sector across England outstrips California’s Silicon Valley. In prime London, tech industry buyers account for a much smaller proportion than the financial sector, at 17%.

Over the next 10 years, the professional, scientific and tech industry is again forecast to show the strongest rate of growth. The financial and insurance industry will remain the largest employment sector but the gap is gradually closing. We expect this change to be reflected in the profile of buyers in prime London.

Some of the new buyers will compete in the existing prime London markets, others will contribute to the expansion of prime markets into less established markets.

Taken from
Spotlight: Prime London Residential Market - Autumn 2014