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
Voices
voices
Sport
Roger Federer is greeted by Michael Jordan following his victory over Marinko Matosevic
tennisRoger Federer gets Michael Jordan's applause following tweener shot in win over Marinko Matosevic
News
peopleJustin Bieber accuses paparazzi of acting 'recklessly' after car crash
News
people
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
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

IT Teacher September strt with view to permanent post

£110 - £130 per day + Competitive rates of pay: Randstad Education Reading: IT...

Qualified Nursery Nurse

Negotiable: Randstad Education Crawley: This independent Nursery is looking fo...

Qualified Nursery Nurse

Negotiable: Randstad Education Crawley: This independent Nursery is looking fo...

Merger and Acquisition Project Manager

£500 - £550 Per Day: Clearwater People Solutions Ltd: Our client are currently...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis