London property prices edge higher

Property prices in central London reached a record high in July, fuelled by growing demand from overseas nationals, particularly Europeans, seeking to escape economic instability back home, according to the latest Knight Frank report.

The strong capital growth recorded in central London could have a positive impact on the rest of the capital, as some market experts see now as the start of another cyclical upturn in London property prices. Historically, property price growth in prime London has rippled out to other parts of the city.

The property consultants said that the median price of a London home costing an average of £3.7m appreciated by 9.6% in July compared to the same month last year.

The report suggests that the euro-debt crisis that led to bailouts for Greece, Ireland and Portugal and now threatens other nations, such as Spain and Italy, has encouraged more Europeans to buy property in London, where there are a number of new homes being built to meet growing demand.

Noel Flint, head of London residential at Knight Frank, comments: "Once again the main reasons for high strength demand in the prime central London market are the overseas purchasers and low stock levels. In the last month our offices have seen more interest from buyers from continental Europe , possibly due to the ongoing Eurozone crisis as well as London providing a more cosmopolitan lifestyle."

Sterling's weakness against other major currencies has also attracted more foreign buyers to the capital. The latest Bloomberg Correlation-Weighted Indexes shows that the UK pound has fallen by an average of 22% against other developed-market currencies, since the UK housing market's previous peak in March 2008, making a home in London more affordable for overseas buyers.

International demand for homes in London was also supported by purchasers from the Middle East, as they attempted to add to the their property portfolios before Ramadan starts this month.  

Flint continued: "Middle Eastern buyers have, as always, been key to the market, but with an early Ramadan their time spent in London has been shortened, but we do expect to see a second window in early September as they continue their search for a London property while enjoying the cooler climate."