Real Estate

JP Morgan Private Bank On The Case For London's Real Estate

César Pérez and Paul Knox JP Morgan Private Bank 16 September 2013


JP Morgan Private Bank sets out the case for why investing in London makes sense, even though headlines might suggest it is now a very expensive town.

JP Morgan Private Bank sets out the case for why investing in London makes sense, even
though headlines might suggest it is now a very expensive town. César Pérez, chief investment strategist
EMEA and Paul Knox, head of wealth advisory for EMEA at the bank set out their

Global residential real estate markets are centered on cities, not
countries, and each reflects the city’s global status as well as the behavior
of a global home-owning and investing elite. “New World”
cities have risen in the hierarchy of these markets while “old world” ones have
descended over the last seven years. London
is the exception to this.

We recently held our annual Real Estate market conference in which we
discussed our outlook and market insight into the UK and the European prime
residential markets. London is probably the most
cosmopolitan of all world cities and the fastest growing city in Europe. Based on a research carried out by property
consultant Savills, 34 per cent of all prime residential London buyers in 2011/12 were from overseas.
Despite a perception to the contrary, the majority of overseas buyers are
looking to London
for their primary residence.

The question is: why London?
Historically, London
has been a “safe haven” for overseas real estate investments. Sterling weakness
has made the capital’s real estate look cheap by global standards. However, London is a global brand, its world class status means
that it competes with few other cities in Europe.
It is one of the top three global financial centers and the main trading hub
for the European region.

But this is not the whole story; overseas buyers settling in London are important to
the wider economy too. Wealth-creating incomers contribute to the city’s global
standing and cross-border business interests. They support high-end retail,
businesses and services as well as helping to make London the diverse and multi-cultural city it
is and in which so many can feel at home.

Overseas buyers in London
real estate have been increasing for both residential and commercial property.
Overseas buyers of high-end London
homes accounted for 38 per cent of deals last year compared with 23 per cent in
2005, data from Savills shows. The figure for non-British buyers rises to 78
per cent for new-build properties worth more than five million pounds. The
buying has had significant and often beneficial, impacts. It is concentrated in
the new build sector and the top end of the market due to a combination of
targeted marketing and familiarity with an international product rather than
the second-hand market. Growth in prime London
has been strong but also unprecedentedly stable recently. London doesn’t look overheated by global
standards although there may be pockets of concern where yields are
particularly low.

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