London is a property hotspot – but it's not immune to UK's woes

What will happen if international buyers take fright, if euro-countries default on debt, or if there are mass redundancies in the financial-services sector? The bubble could burst, says Chiara Cavaglieri

Our capital city stands out for many reasons and its property market is no different.

While the rest of the country faces dwindling house prices, and nervous buyers stay away, low supply and high demand are driving prices up in London.

"London feels like a separate country at the moment. We used to think that London was always six months ahead of the rest of the UK but that has changed," says Andrew Montlake from mortgage broker Coreco. "If anything, I don't think London is ahead any more. I just think it's different."

Asking prices in London are up 7.2 per cent compared with last September, according to the new house price index from Rightmove – the equivalent of an extra £28,870. A lack of new sellers has been blamed for rising asking prices, with the number of properties put up for sale falling from 20,496 in September 2010 to 17,966 a year later. Turning to Rightmove's nationwide figures, there is a much smaller price increase of 1.5 per cent since last year; over the summer period, asking prices fell by 0.3 per cent.

London still attracts some of the wealthiest investors: another new report, the global billionaire property index from international estate agents Savills, reveals that homes for the super-rich are more than £3,000 per sq ft in London – the fourth most expensive in the world. Ongoing turmoil in financial markets has created an influx of foreign buyers looking for a safe haven for their assets, with many choosing London property.

"The top-end market is driven by international demand assisted by the cheap pound," says Miles Shipside, a director of Rightmove. "There is a lot of money coming into London and a shortage of properties, so rich people are competing. That gives you some trophy prices being achieved which generally helps confidence elsewhere."

The appeal for buyers looking at London property is clear, with strong demand coupled with relatively weak supply and resilient prices. Prices did take a tumble in 2008 but were quick to recover in the following two years as foreign buyers and bankers with bonuses returned to the market.

London's landlords are raking it in too. Average rents in England and Wales rose by 1.2 per cent to £713 per month, according to the latest buy-to-let index from LSL Property Services. It's the largest monthly increase since August 2010 – but London saw the strongest annual growth with rent up 6.6 per cent.

"London has always had a micro-climate of its own. One factor that is driving up values in the capital is the return of amateur landlords. They are increasingly buying property in order to benefit from soaring rents," says Giles Atkinson, a director of estate agency Atkinson McLeod.

Many in the industry have high hopes for London prices. High-end estate agency Knight Frank is predicting that new-builds in hot spots will see prices rocket. Most of the prime areas were picked out because of regeneration plans and proximity to transport links such as Crossrail, which will run across London from 2018.

The golden opportunity, according to Knight Frank's forecasts, is Nine Elms, in south west London, which it thinks will see a mammoth rise of 140 per cent from £750 per sq ft to £1,800 in 2016. Other key areas include the eastern fringes of the City, Hammersmith and Marylebone.

Despite this, London is not immune to the problems affecting the rest of the UK. "The biggest problem for London is the affordability issue," says Mr Montlake. "People are struggling to raise deposits and so more people are renting. Rents are strengthening because there is shortage of properties – but there has to be a cut-off point eventually," says Mr Montlake.

Some experts are even warning that it is only a matter of time before the property bubble in London bursts. Nick Hopkinson, a director of PPR Estates, has reported a jump in the number of "distressed sellers" willing to sell up quickly, particularly in areas hit by recent riots, such as Lewisham and Croydon, where buyer interest has dropped off and sales have fallen through. He adds that he was aware of international buyers getting cold feet after the riots, which could be an indication of what might happen to the rest of London if they lose this part of the market.

"Maybe that will be the start of the tipping point which bursts the London property bubble," he says. Mr Hopkinson explains that foriegn buyers see London as a safe haven for their cash. And if these buyers pull out, perhaps because currency markets change or we see the likes of Portugal and Greece defaulting, interest in London could dissipate.

Even if London can rely on international buyers, anyone interested in buying in the capital must keep in mind that any market is cyclical. There is also a risk that some of the outer boroughs of London may not have as strong a market as people might think.

"As you move towards the M25 the market can get a little more volatile or at the very least uncertain. Examples of this would be Barking and Dagenham, Bromley, Lambeth," says Jennifer Warner from

What could knock London is an influx of properties on to the market and more forced sales, dragging prices down and causing buyers to hang back till the market hits bottom. If there were, say, lots of redundancies in the financial-services sector, people may be forced to sell, creating a downturn in prices, particularly when interest rates rise and owners can no longer rely on rents to cover their mortgage.

"In other parts of the country there is an oversupply of residential properties, due to unemployment black spots and local authority job cuts starting to bite.

London hasn't really had a combination of job losses and high interest rates, but that's not to say it won't happen," says Mr Shipside. "There are boom times and there are negative times ... Don't make the mistake of thinking there won't be other downturns that will affect the London market – they will come again."

FootballGerman sparks three goals in four minutes at favourite No 10 role
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
Life and Style
Couples have been having sex less in 2014, according to a new survey
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam