The cost of luxury real estate in London will increase by 10.1% in 2014, even more than the growth in gold and stock prices, which are usually more attractive to investors.
The value of prime capital for luxury apartments in London will increase by 10.1% in 2014, exceeding the FTSE index (up 7.8%), gold prices (price per ounce up 1.4%) and oil (down 3%). Over the next five years, property prices could rise by 48.5%.
Price growth is driven by rising demand for apartments in London, especially from foreign buyers who are not affected by capital gains tax.
Foreign investors' interest is focused on apartments in new developments, which will be an excellent addition to an investment portfolio, and confidence in positive economic growth attracts domestic buyers to the real estate market.
Luxury residential real estate in prime London neighborhoods is undoubtedly attractive to investors. The reliability of growth in this sector is impressive. Confident capital growth is combined with lower volatility compared to stocks and commodities, and a low degree of dependence on major asset classes. All these factors attract potential buyers.
Looking ahead, demand will continue to outstrip supply against a backdrop of steady capital growth, expansion of the private rented sector in the context of economic growth and a labor market recovery, which will provide stable rental income.
Moreover, if no additional taxes are introduced on luxury property or on capital gains for non-UK resident investors, demand for apartments in London from investors will grow in the foreseeable future, barring unexpected economic or financial shocks. Real estate, which has lower liquidity than stocks or commodities, is ideal for long-term investments.
In 2013, house prices in the capital grew by 11.3%, slightly higher than in 2012, while demand from foreign investors and those buying property for subsequent rental or residence did not decline. According to Q4 2013 report, the rates of valuation, viewing and exchange doubled.
With economic growth, the stock market will also resume growth, but at a slower pace than the property market. Gold prices are volatile due to fluctuations in the global economy, and oil prices are expected to fall due to lower demand from major importers.
London remains attractive to foreigners due to its safe city status and the quality of luxury real estate, while currency appreciation becomes more of a minor drawback than a serious obstacle.
The government has already taxed the real estate market with all possible taxes, now it should turn its attention to the commercial sector of the economy.
State policy regarding the luxury property market has been more restrictive than stimulating. The introduction of new taxes on residential property, particularly luxury apartments in London, has largely been absorbed by the market. But how the situation will develop in the future is difficult to predict.
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