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Cost of London des res properties rockets

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  • 22/07/2010
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The cost of renting and buying luxury properties in the capital has surged following interest from wealthy Chinese tenants and the return of City bonuses.

According to investment agent Curzon Investment Property, average rents in upmarket parts of west London have soared by 9.2% in the last year alone.

It believes the jump has been fuelled recently, at least in part, by wealthy Chinese tenants taking advantage of the strong Yuan, which has gained since shedding its dollar pegging on 19 June.

At the same time, big City bonuses are prompting London’s highest earners to seek out top end properties to buy.

However, Curzon warns that the property purchase market is still a long way off its pre-crash 2007 peak, mainly because mortgage lenders are still demanding very large deposits.

But it says that among overseas investors who still benefit from around 30% discounts on prices (due to the weakness of Sterling), interest is edging closer to those pre-2007 levels.

James Moss, director at Curzon Investment Property, believes the London market will return to form in 2011.

He says: “Almost three quarters of our customers are bankers who are spending anywhere between £1 million and £5 million per property. Often, they will have 30-50% of this in cash, although this will depend on the kind of funding structure they are using. More often than not there will be an off-shore company or trust with private bank finance involved.

“While London properties are immensely popular, they are just one global asset class that wealthy individuals invest in. If they are expat bankers then maybe up to 25% of their investment portfolio will be here. For most clients probably around, over 75% of their overall investment portfolio will be in other things.

“Unlike other asset classes, property can be geared meaning that lower equity levels are invested than many people would think so this greatly increases their buying power. So while you can borrow millions of pounds to buy a property, you would not be able to borrow similar amounts to buy shares or invest in gold. That’s what makes property unique and so popular.”

 

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