Julian Knight: Don't be surprised if the roof falls in on London's property boom

Money will flow out of the economy and Treasury coffers

Friday was what I call a top of the market sort of day. My voicemail messages included a lunch invite to a new restaurant opening (sort of invite I like), a breathless fund management firm telling me how great their last-minute individual savings account deals were and a PR explaining that his client had £100m to invest in central London residential property and would I like an interview?

It's the last one that struck home, because in a world of moribund returns and talk of currency and sovereign debt crisis, central London property is the investment de rigueur. You can't be considered truly rich unless you have a pad in Kensington, Chelsea, Mayfair and increasingly beyond as "central London" seems to be spreading ever outwards.

The overwhelming majority of buyers are foreign, Chinese, Russians, Middle Eastern and even a few Greeks (gambling on capital uplift when their own currency is eventually forced to abandon the euro). One estate agent I know told me of the 25 deals it has done this month – all have been in cash and from buyers outside the UK.

For locals this means central London is becoming a ghost town with residences mothballed.

It also means locals are priced out. One young couple I know who asked how much it would be to buy the shoebox, one-bedroom flat in Borough they were renting were told over half a million quid – and it's only recently Borough began to be considered "prime central London".

In short, we have a separate market in central London not related to domestic economic growth but tied into the global drive for possessing tangible assets.

But London surely cannot remain the investment de rigueur for much longer. More aggressive property taxes (which were announced in the Budget), social problems (such as a repeat of last year's riots) or investors deciding prices are too "toppy" and placing their money elsewhere is all it needs for the market to go pop.

But really, what does this matter to you and me who don't live in these prime central London areas? Well, money will flow out of the economy and Treasury coffers and the wash-out effect – where London price rises filter through north and west out of the capital – will not have time to take place.

The current boom is too rapid and unsustainable to help those in other parts of the UK lift out of negative equity. We may face all the negatives of a boom turning to bust but without any of the prior benefits.

Discover more property articles at Homes and Property
PROMOTED VIDEO
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs General

Recruitment Genius: Polish Speaking Buying Assistant

£18000 - £20000 per annum: Recruitment Genius: Superb opportunity for a BUYING...

Recruitment Genius: Support Worker

£14560 - £15000 per annum: Recruitment Genius: This company offers personalise...

Recruitment Genius: Key Account Manager

Negotiable: Recruitment Genius: A really exciting opportunity has arisen for a...

Recruitment Genius: Multi Trade Operative

£22000 - £24000 per annum: Recruitment Genius: An established, family owned de...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project