FT reports that high-value property buying in London has spiked in the last year.
The value of transactions spent on properties within London with a value of $10 million or more exceeded $4 billion.
FT states that 201 properties were sold in total with an average price of $18.6 million, and, 31 properties were priced at $25 million or more.
One of the largest sales was the Belgravia Mansion, where the buyer paid a total of $58 million.
The most active buyers were from Russia, France and China, the value of properties sold helped London skyrocket into becoming the top place in the high-value property market, surpassing Hong Kong and New York in one swoop.
The foreign buying of homes and properties was driven by a decrease in the value of the pound after Britain leaving the European Union.
A weakening pound makes imports more expensive for the UK, however, exports become cheaper.
This means that foreign buyers will find it cheaper to afford UK goods and services, so, as a result of a weakening pound, demand for UK housing has gone up from foreign buyers as it is effectively less expensive.
At the same time, because of the extension in stamp duty holiday, domestic demand for housing has increased.
This is because the scheme is designed to make homes cheaper, however, opportunistic buyers are using the scheme to purchase several properties.
Because of this, demand for housing also increases, meaning the price also rises.
The extension in Stamp Duty holiday also may have had somewhat of a significant impact as the tax break is up to £500,000, however, because of this limit, it likely had little to no effect on the super-prime housing which has been in demand by foreign buyers.
So, the UK housing market has seen an increased demand in both luxurious housings, as well as more standard homes.
Consequently, the price of these homes has risen, and this is evidenced by data from Halifax which states that house prices have risen over 6%.
This price increase will generate a positive wealth effect for current homeowners, meaning the foreign real estate investors have likely pocketed a sizable profit by seizing homes when opportunities arose, the opportunity being, a weakening pound.
Domestic buyers who bought normal properties will also experience the positive wealth effect, however, the increased house price may frustrate prospective buyers as they may no longer be able to afford a mortgage.
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