Rich foreigners are flooding into luxury London real estate, spooked by socio-political turmoil in Europe and the US and Eurozone debt crises.

Luxury property prices in central London rocketed almost
10 per cent over the last year to an all time high, buoyed by a wave of wealthy
Europeans seeking a safe haven for their cash.

Values are now over a third higher
than the post-credit crunch trough in March 2009, after growing 9.6 per cent. Meanwhile rents are also at an
all time high, according to the monthly Prime London Index compiled by agent Knight Frank. 

A growing pool of wealthy overseas buyers are buoying values, said the agent. Spooked by socio-political turmoil in Europe and the US and Eurozone debt
crises, increasing numbers of Spanish, Greek and Italian buyers, in addition to
the ubiquitous Russians and Middle Easterns, are seeking a bolt hole for their
cash.

“In the last month our offices have seen more interest from
buyers from continental Europe, due to the ongoing Euro-zone crisis as
well as London providing a more cosmopolitan lifestyle. Middle Eastern buyers
have, as always, been key to the market,” said Noel Flint, head of London residential at Knight Frank.

A Two-Way Recovery

The news highlights the growing
disconnect between luxury London homes (defined as properties worth £1 million
and above) and the rest of the UK, where property prices are dropping amid
concerns over a double dip recession. While owners of properties in central London have seen
the value of their home rise by nearly 10% since July last year, average values
in the wider UK market have fallen by over 1% during the same period.

Gráinne Gilmore, head of UK
residential research at Knight Frank, said: “The results highlight the
difference between the central London market and that in the rest of the UK. Sales
activity in the prime central London market has been strong in recent months,
with a rise in new properties coming to the market, and a subsequent rise in
the number of exchanges.”

The rising level of supply has gone some way to addressing
pent-up demand in the market, but the desire for prime properties in the
capital looks set to continue, signalling a further rise in prices throughout
the rest of the year, albeit at a more modest pace, she added. 

The strongest sales markets were registered in the traditional wealth epicentres of Chelsea and Mayfair, where
values rose by 7.7% and 7.2% respectively over the last six months.
The Belgravia lettings market is leading the way with a 1.8% rise in values
over the last three months and the highest levels of demand.

New Developments

Foster + Partners' The Glebe, Chelsea

Some are taking advantage of the strong demand for London's finest real estate. The development of a £250 million new apartment block, expected to be the most expensive address in London, was announced this week. The Glebe in Chelsea is backed by European investment manager Orion Capital Managers which bought the one acre plot of land for £85 million. There is planning consent in place for a scheme designed by star architect Norman Foster's Foster + Partners with six apartments, a duplex penthouse and two large detached villas.

Individual apartments will be marketed at up to £35 million and residents will have their own swimming pool, games room and even a private lift. London-based Beauchamps Estates managed the sale to Orion. 

"The site is located between 36A Glebe Place and Old Church Street, close to the King’s Road and Sloane Square. Construction will start in 6 months and completion is expected in 2014.

Aref Lahham, director of Orion Capital Managers, said: “We are excited about having acquired one of the best residential sites in London. The scheme will be outstanding in terms of its location and quality."