Safe-haven seekers propel prime London house prices to new highs

Property prices in prime central London locations jumped by 0.7 per cent to a new record in May as wealthy Europeans flocked to the capital looking for a safe haven for their money amid the Eurozone crisis.

Last month's increase means the prices of prime London houses are now 47.3 per cent higher than at their post-credit crunch low in March 2009, according to research from Knight Frank, the estate agent.

The increase came despite an increase in the stamp duty rate to 7 per cent for properties worth £2m or more.

Liam Bailey, Knight Frank's head of residential research, said: "While it looks very much that the surge in Greek buyers has fallen off sharply since the beginning of the year – those who have had the funds to buy have done so – we are now seeing a noticeable uptick in interest from France, Italy, Spain and even German-based purchasers looking at the prime London market.

"If the crisis in the Eurozone leads to a break-up, will this flow of funds continue to London? The final form of the break-up will dictate that," Mr Bailey added.

Any country that seems to be at imminent risk of ejection from the Eurozone is likely to see a massive outflow of capital, some of which is ending up in expensive bricks and mortar in London, says Mr Bailey.

Last month's 0.7 per cent jump in prices means that prices are now 10.7 per cent than a year ago. It follows a 1.1 per cent increase in April and leaves prices 12.1 per cent above their previous peak in March 2008.

Analysts said the figures presented further evidence that the London property market was one of three safe havens for cash, alongside gold and the swiss franc.

On Saturday, upmarket estate agency Savills reported that it has seen web searches from France increase by 16 per cent, compared with six months ago, with Spain up 10 per cent and Italy rising by 9 per cent.

Furthermore, the falling value of the euro against the pound, making property purchases relatively more expensive, seems to have had little impact on rising prices, analysts said. Rupert des Forges, a partner at Knight Frank, said: "Recent weeks have seen an even greater influx of European buyers looking to purchase property in the Prime London market.

"We have recently sold examples including two substantial flats in a premier Knightsbridge block with asking prices in excess of £15m.

We have also seen a sharp rise in interest from French investors looking to move quickly before [new president François] Hollande's newly proposed wealth tax."