UK prime property hotspots are showing no signs of slowing down, thanks to the consistently high interest from foreign buyers. Unsurprisingly, prime real estate in luxury London postcodes and the South East has been largely unaffected by the political turmoil and resulting property market volatility caused by the Brexit vote.
Multi-million pound property in locations such as Mayfair, Ascot (a home there recently sold for over £12 million), and Oxford is selling very well, often snapped up by cash buyers who are in turn worried about economic or political instability in their own countries, and still see UK property as a sound and low-risk investment.
Manchester, Birmingham and Edinburgh are three other locations that are experiencing property booms buoyed at least in part by foreign cash. Manchester and Birmingham have emerged as UK's fastest-growing property markets largely due to the highly successful urban regeneration efforts in these cities.
Manchester's Media City has transformed its jobs market, while the consistent successes of Manchester's universities have ensured a constant supply of students (read: 'renters' in property investors' eyes). Birmingham is undergoing a very costly, multi-billion pound regeneration project, which includes lots of new housing and town centre redevelopment, and is already the number one relocation destination for young professionals unwilling to pay London house prices.
The case of Edinburgh is different, perhaps making Scotland's capital the most likely city to suffer from the same problems London has suffered due to its own 15 year long property boom. Unlike Manchester and Birmingham, Edinburgh isn't growing as a city, with relatively few new housing developments. This is fuelling an extraordinary demand for its rapidly dwindling old housing stock. Edinburgh real estate is fast becoming the alternative to comparable London properties for investors who either can't quite afford London, or are being extra-cautious politically, foreseeing a potential future independence vote that could see Scotland becoming part of the EU. If Edinburgh continues its current trend of house price growth without investing into long-term new housing provision, it could see the same unsustainable property market as London very soon.
In fact, all of the locations currently celebrating steady property growth ahead of other areas of the UK, could exercise some caution, particularly where the money tends to come from international buyers. For one, the increase in wealthy overseas investors snapping up properties almost always results in a substantial proportion of those properties standing empty, resulting in the hollowing out of local communities. To say nothing of the financial implications for the affordability of the given area for local prospective homeowners.
A study recently conducted by Kings College London has found that the increase of foreign property ownership directly reduces the rate of local home ownership in the area, and not just because there are fewer homes left. According to the study, for every per cent of the property market owned by foreign buyers, the average house price in the area increases by over 2 per cent; a worrying equation.
This points to a greater need for overseas property investment regulation, something that has recently been acknowledged by the government's decision to increase stamp duty for overseas buyers. On a more local level, London Mayor Sadiq Khan has announced that Londoners will get 'first dibs' on all newly built homes under £350,000 (opens in new tab) in the capital. London's biggest housebuilding associations will comply with the rule to reserve all new builds for UK-based buyers for the first three months of the homes being up for sale.
If this move makes house price increases stabilise in respective London boroughs, the initiative could provide a template for other cities to protect their housing markets from unsustainable growth.