July 23 - Foreign investors using London property as a safe haven are warned they may need to think again if quantitative easing is pulled back but, as Joanne Nicholson reports, matters in the hands of the central banks could prevent a bursting of a so-called bubble.
The more salubrious streets of London have been the focus of attention for foreign investors since the global crash. Houses beginning at the £2 million mark and far beyond, have been snapped up by those seeing the city's property as a safe haven. But now some say the period of over-valuing could come to an end. Research shows loose monetary policy could cause prices to fall around 15 or 20 percent. Michael Marx from real estate developer, Development Securities, which commissioned the research, says the financial crash was unprecedented (SOUNDBITE) (English) MICHAEL MARX, CHIEF EXECUTIVE, DEVELOPMENT SECURITIES PLC "It shouldn't surprise us really if the physical market - prime central residential London, being one of them, also shows extremes and I think we are now building up to levels that will be extreme." Prices in parts of central London have risen 30% in little over a year. And, according to estate agents Knight Frank, more than half of the prime central properties went to overseas buyers. One in 10 were from the euro zone with investors from Russia making up 9%. What no-one is able to tell us is when this so-called bubble might burst. The collapse of the euro could be one factor but the European Central Bank has leant support to prevent that from happening. If quantitative easing is scaled back too quickly in the U.S, that too could be a factor. But until any of these things happen, there doesn't seem to be an incentive for investors to pull out and put their money elsewhere. Ed Mead is from estate agent, Douglas and Gordon. (SOUNDBITE) (English) ED MEAD, DIRECTOR, DOUGLAS AND GORDON ESTATE AGENT, SAYING: "It's very difficult to get a feeling for what's going on in the summer because it's a slow period, traditionally. This year ramadan's come very early, so the Arabs who would normally be spending a lot of money here aren't at the moment. I think, come September October, we'll know whether this slowdown is a change in attitude with buyers or whether it's just a summer break." For the time being, a big concern for foreign investors is whether or not the U.K taxman will make it less attractive for them to buy here. Any changes might not come until a change of government but the next election is still two years away.