Is this a good time to invest in the London property market?

Dear All,

During the past few weeks I have been asked by many of you whether this is a good time to invest in the London residential property market. However, before I begin I would like to introduce myself to those of you who do not know me. I, Mohammad (Mamad) Kashani-Akhavan, have been working as an International Property Consultant based in London for the past twenty nine years.

Throughout my career I have witnessed a phenomenal growth in the value of London’s prime residential properties. This has in large, been due to strict and inflexible planning regulations creating a very limited supply of new properties coupled with a continued strong demand from foreign buyers looking for a safe haven to invest. To illustrate this point, I sold a house in 1984 for £1 million. This house – located in Knightsbridge – is now valued at £23 million. During the same time period, the value of the FTSE 100 has only increased 5 times.

In my open letter published in the Financial Times on 29th January 2009, I stated that foreign investors’ demand for prime properties in London is for many reasons. To name a few, the UK is politically stable and thus a good fairground for investment. It also has an established legal system safeguarding foreign ownership which gives foreign investors the security they need to invest.

However, is there a time when the prime London property market with all its attractions, will fail to attract an ever increasing number of foreign buyers to continue fuelling the engine of its price growth? It is important to remember that buyers are finding it increasingly difficult to find properties that represent sensible value anymore. As an example, it is difficult to justify an asking price of £11 million for a four bedroom apartment in a new development along Bayswater Road, a second-rank neighbourhood in Central London.

Given the fact that London property prices have now become too high compared to most other major cities in the world, I believe that a cooling off period in property demand from foreign buyers is likely. This could lead to a long period of stagnation. My advice to investors therefore is simple: whilst I believe it’s always a good time for long term investors to purchase property in London, it is now more important than ever, that they should wait for the right opportunity and only invest where the price of the property is sensible. Investors should not buy properties that do not represent good value with the sole hope of making money in what they believe will be a never ending rising market.

Wishing you all every success.

Mamad Kashani-Akhavan

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