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Knight Frank: Top of London market virtually immune

Tuesday, 3 June 2008 12:00 AM

The upper echelons of the London superprime property market are virtually immune to the credit crunch, given their international focus, argues Knight Frank.

Sectors of the property market, properties priced over £5 million and even £10 million, attract international buyers who have largely been unaffected by the liquidity squeeze.

Buyers in more modest price brackets have seen mortgage lending severely curtailed in recent months as wholesale finance remains expensive on global financial markets.

However, this is not the case for the most expensive properties.

"When you go above £5 million, it becomes very much an international market - the people who are buying are overseas buyers," said Liam Bailey, head of residential research at Knight Frank.

"They are generally coming from countries like Russia, Ukraine, Kazakhstan, the Middle East and the Far East, and they are bringing with them wealth from economic sectors that are untouched by the credit crunch, such as oil, gas, commodities and so forth.

"They are still buying and they are buying more now than they were last year. It is very healthy at the moment. I would have said it couldn't go on outperforming until the last five months proved that it can," he added.

In 2007, there was a 41 per cent increase in the number of deals done in the £5 million plus market, according to estate agent Savills.
This is despite the widespread correction seen in average property prices, beginning in September 2007.

Furthermore, again according to research by Savills, the super-prime market - properties over £5 million - was the only market to show any growth in the first quarter of this year, recording a 1.7 per cent increase.

"The problem is that there needs to be confidence in any market, but even very rich buyers can lose confidence. For that reason, they may decide to sit and wait," continued Mr Bailey.

"Against that, the reality is that there is quite a limited supply of properties and if you want to buy a house on Eton Square, you tend not to muck about. If you have the money and opportunity you will just do it."

Chris O'Toole

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