With their country on its knees financially, Italian buyers are snapping up prime central London.
More than 2,000 years after Julius Caesar first stepped off his boat in Kent, Britain is once again facing a Roman invasion. But the new army isn’t coming for our tin or our women; they want our bricks and mortar.
A recent survey published by agency Knight Frank shows that Italians have overtaken Russians as the leading buyers of prime London property. Since January, they have accounted for eight per cent of all sales in the area. Last year it was the Greeks, who more than doubled their spending on prime London as riots raged across Athens. This year, it is their cousins across the Adriatic who are opening their chequebooks. The total spend for Italians in prime London is estimated to be £408m for 2011, up from £185m in 2010.
It’s obvious why: Italy is in danger of falling apart at the seams. Economic reports worsen daily. The Bank of Italy forecast the Italian economy to contract by 1.5 per cent this year, while employment is shrinking at its fastest rate since July 2009. The eurozone as a whole continues to be locked in crisis. Successive rescue packages have failed to improve things, and German lawmakers are reported to be preparing for Greece’s departure from the euro. Where Greece leads, there is a risk Spain, Portugal and Italy will follow.
In short, there hasn’t been a worse time to have assets in Italy since Mussolini was in power. Italians with the resources to do so have been taking their money out of the country as fast as they can. And where better to head than London? The capital’s history, shopping, culture and nightlife, as well as Britain’s reliable legal system, make it the clear target for a safe property investment.
“For the guys who are nervous about their eurozone wealth, London is the nearest obvious place to diversify,” explains Liam Bailey, head of residential research at Knight Frank. Other cities have benefitted too – Berlin and the Cote d’Azur in France have also seen double-digit spikes in interest – but London remains favourite.
“It’s a global centre on their doorstep, well-connected but crucially outside the eurozone. Also, there’s a big Italian community in London, so the professional classes have lots of ties.” There are roughly 40,000 Italians living in London, many working in finance. They are becoming more adventurous about where they live, too.
“Italians who’ve been settled in London for some time are starting to move out of the centre, to Wandsworth and Fulham, or south to Clapham. But the new money is mostly for investment properties, so they’re sticking to the established addresses: Notting Hill, Chelsea, Holland Park and Kensington.”
Education is another powerful draw for Italian buyers. “Growing numbers of European children are going to university or school in Britain,” explains Bailey. “Italian families can buy properties as investments, and in the short term their children can live in them while they study.”
Alarmed by this trend, the Italian government has responded with a mansion tax on overseas properties. Italian residents will have to pay 0.81 per cent a year on second homes abroad (0.76 per cent on all foreign assets). It won’t affect those who have moved full-time to Britain, only those hoping to use property as a way of moving their lira-based euros out of Italy. What’s more, if George Osborne’s Budget on March 21 includes a controversial mansion tax, as has been rumoured, then Italian owners could find themselves doubly taxed.
Henry Pryor, a buying agent with 25 years’ experience of central London, believes this may put the brakes on Italian flight to London.
“I completed on a property in Kensington for an Italian couple this week,” he says. “I wonder whether it’s the last Italians who are going to buy for the next six months. Lots of Italian buyers are going to take a rain-check and see whether the new Italian tax is one of those laws they can just ignore, and if there’s going to be a British mansion tax too.”
“If there isn’t capital appreciation in London, then that could be a lot of money each year just to keep a property here.”
On the surface, all this money flowing into London looks like good news, but there are complications. Fuelled by cash from Russia, the Middle East, Asia and now benighted European countries, prime London house prices have continued to rise. They increased by 11.3 per cent last year. Knight Frank expects them to do well in 2012 as well, while the rest of the country lags behind. This distortion makes it more difficult for those working in the capital on normal wages to live centrally.
Another problem is that absentee landlords don’t contribute to the local economies, meaning that the areas where foreign buyers are concentrated, such as Belgravia, can sometimes seem like ghost towns.
Even if Italian spending on London is nearing or even, if Pryor is correct, past its peak, there seem to be plenty of wealthy buyers around the world still keen for a piece of the central London pie.
Bailey says that despite Italy temporarily overtaking the Russians, there is no sign that they are truly slowing down in purchasing London property. It’s unlikely that Vladimir Putin’s highly contested reelection last week has done much to calm the movement.
“Prime London growth is a long-term trend, but Greece and Italy are shorter term, prompted by the situation with the euro,” says Bailey. “At some point there will be a resolution of that crisis, and interest will drop off.” If the gloom from the continent is anything to go by, London’s property will be a desirable investment for some time. Safe as houses; certainly a lot safer than euros.
Source: The Telegraph