By, Charlie Jacoby
2 min read
ByCharlie Jacoby, Charlie Jacoby
Bankers and politicians may be running a bit short, but that is not denting the spending power of the world's billionaires. Global wealth has increased in the past five years, with the number of billionaires increasing by 20 per cent in the past year alone. According to agent Beauchamp Estates, this has had an effect on the London property market, with many billionaires within the Asia Pacific area choosing to invest in London. This is reflected in a 59 per cent increase in the number of sales over £5 million in the first nine months of 2011, compared to the same period in 2010.
Beauchamp has produced a report which shows why top London property is selling so well. It maintains that London continues to offer tangible benefits for foreign investors. Globally, a high proportion of the offspring of high-wealth individuals are choosing to study in the UK. This makes purchasing London property an even more pragmatic and tempting proposition.
The exchange rate continues to attract foreign investors. Buyers in currencies most active in the London market are still able to buy at a lower price than at the peak of the market in 2008 - especially Thai and Singapore purchasers, who can acquire property at a 19 per cent discount compared to three years ago.
Beauchamp points out that only certain kinds of property appeal to these buyers. Overseas purchasers continue to reject London townhouses in favour of purpose-built luxury apartments. Investors who are used to having large lateral living spaces in their home markets do not see the appeal of the London townhouse, with its many floors and multitude of smaller rooms.
This preference towards lateral living space is reflected in the fact that the values per sq ft of flats over £5 million are at a 27.3 per cent premium compared to houses of the same size.
Beauchamp has recently come back from a trip selling property in Hong Kong, Malaysia and Singapore, where it has had significant success in the market for £500,000-to-£1 million off-plan apartments.
Among schemes where it has sold apartments is one close to Upper Street in Islington, where studios start at £485,000, one-bedrooms at £550,000 and two-bedrooms at £835,000. The building will not be completed until 2014.
Beauchamp's Gary Hersham says; "The typical profile of a Far Eastern purchaser is very different from the home market. Primarily he has his eye on capital growth and given that most purchasers are already holding a portfolio of five or six properties, they have already proved to themselves the value of investment in London property."
Research by estate agent Savills points out that, when it comes to a billionaire choosing a home, London faces significant competition from the Far East. Its 10-city global billionaire index saw values rise 10 per cent in first six months of 2011.
Savills says that Hong Kong is in a league of its own in value terms, more than twice the value of London (£6,700 versus £3,090 per sq ft).
Tokyo is number two in terms of £psf and in terms of size, making this the most expensive of any world-class city for the ultimate home, at £83 million. Singapore (144 per cent), Mumbai (138 per cent) and Moscow (110 per cent) recorded the greatest five-year growth to end 2010.
"We recently identified 10 world-class cities whose real-estate markets have more in common with each other than the mainstream markets of the countries in which they operate and they are all attracting billionaires' dollars, whether generated at home or overseas," says Yolande Barnes, director of residential research at Savills.
"Global billionaires can make any country their home, and often have several different residences across the globe. Most will seek a base where they are doing business.
"This has the effect of funnelling global equity into the very best residential real estate - a rare commodity in any city.
"Billionaire buyers demand the best international standards of accommodation and are paying prices to match, creating a super-class of global billionaire homes."