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
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: Trainee Accounts Office Administrator

£15000 - £16500 per annum: Recruitment Genius: The ideal candidates will have ...

Recruitment Genius: Graphic Designer

£22000 - £30000 per annum: Recruitment Genius: This is an opportunity to join ...

Recruitment Genius: Bookkeeper

£23000 - £28000 per annum: Recruitment Genius: This fast growing boutique prac...

Recruitment Genius: Customer Service Executive

£18000 - £22000 per annum: Recruitment Genius: This is an exciting opportunity...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?