property investment

The prime central London property market has been in the doldrums for around five years, without registering a year of growth. However, a report by Knight Frank confirms that in the 12 months to May 2021, prime central London property prices increased by 0.3%. This comes amid optimism with the UK government set to lift many COVID restrictions. Interestingly, even though the prime central London property market is back into positive growth, we have yet to see the reinstatement of international travel.

Middle East investors returning to UK property market

Despite the doom and gloom surrounding London, the consequence of Brexit and COVID, it seems that Middle East investors are starting to see value again. There has been a steady increase in the number of Middle East investors over the last four quarters:-

• Q2/2020, 10%
• Q3/2020, 10%
• Q4/2020, 13%
• Q1/2021, 16%

At this moment, it is difficult to say whether Middle East investors are looking to jump the gun ahead of an easing in international travel restrictions or this is just an ongoing increase in momentum. However, those who follow the global property market will be well aware that London continues to rank highly amongst investors despite a raft of negative comments and challenging forecasts.

Is a 0.3% increase in property prices significant?

Sceptics will suggest that a 0.3% annual increase in prime central London property prices is irrelevant. However, as we touched on above, this comes before the wholesale lifting of pandemic restrictions and the resurrection of restriction-free international travel.

In fairness, the prime central London property market appeared set for recovery just before the pandemic. Property prices recovered from an annual fall of 5% in May 2019 to a reduced fall of just 2% at the start of 2020. Obviously, as a consequence of COVID, the market then ground to a halt, with property price reductions falling back to previous levels. However, February 2021 was a turning point for the market, with a gradual improvement through March, April and May. This took the annual performance of prime central London property back into positive territory.

Keep your eye on Mayfair and Knightsbridge

The lifting of international travel restrictions, expected in the next few weeks, will certainly add interest to the London property market. Many believe that high-end markets such as Mayfair and Knightsbridge will benefit significantly from an upsurge in international visitors. However, it is also essential to note the currency and the fact that sterling has shown signs of recovery. Many believe this is due to a successful ongoing vaccination programme.

We have also seen several trade agreements announced by the UK government as the country attempts to claw back lost trade due to Brexit. While there is a long way to make up Brexit trade losses, progress is certainly being made. This, in turn, will support the pound, potentially prompting overseas investors to act sooner rather than later. Many of those investing in foreign denominated currencies have benefited from the relative weakness of sterling. However, it would appear that those days may be coming to an end!

Summary

It is interesting to note the significant increase in Middle East investors returning to the prime central London property market. The relative underperformance of prime central London property prices over the last five years seems to have pricked the interest of international investors. The lifting of pandemic restrictions, return of international travel, and more focus on recovery instead of fighting the pandemic can only help.

It may be too soon to call time on the recent difficulties experienced by the prime central London property market. However, for the first time in many years, there are reasons for optimism, and many investors seem determined to put down their marker.

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