Hugh Wade-Jones is director of Enness Private Clients
The headlines declaring that the UK has entered a double-dip recession may have merely confirmed what most of us already knew but official substantiation has nevertheless landed a heavy blow on the fragile confidence of the average Brit.
Many will be wondering what the latest economic bad news will mean for them in terms of employment stability, the general cost of living as well as their mortgage repayments if they own a home, or their already slim prospects of getting on the property ladder if they are an aspiring first-time buyer.
It is not just individuals who will be affected by the downturn either. Businesses across the country will be affected and one of my biggest concerns is the psychological impact the latest recession will have on the banks in terms of their attitude to lending. It has been volatile enough in the past 12 months as it is and this latest development could see them completely battening down the hatches.
While it is difficult to put any kind of positive spin on the double dip, it is interesting to note the contrasting sentiment among different demographics. The early signs are that high net-worth borrowers remain unbowed by the Office of National Statistics figures and I would expect this to remain the case due to a number of supporting factors.
Chief among these is the lack of stock which has kept prices in the prime tier high while mainstream values have stalled. Another huge difference is that the top end of the property market is being driven by foreign buyers whose business interests lie outside the UK so the news of recession will have little sway on their decision to invest.
Our latest internal figures showed that foreign and offshore buyers accounted for 52% of our business volumes in the first quarter of 2012 and there is nothing to suggest this won’t continue.
Relationships we have established in the Middle East and east Asia are starting to bear fruit and with ongoing economic uncertainty in the eurozone, we would expect money to pour out of countries such as Greece, Italy and Spain, so hopefully we will be able to capitalise on that.
One yardstick I always like to use as a good indicator of the health of London’s prime property market is Knight Frank’s index and, in particular, its list of high ticket sales. As well as satisfying the inner value voyeur that exists within us all, it is also a good measure of buyer sentiment at the very top end.
A cursory glance at the most recent listings reveals the £120m sale of Hanover Lodge in Regent’s Park (believed to be to an unnamed Ukrainian), a £94m vend in Kensington Palace Gardens and a £60m+ transaction in Belgrave Square, among a number of eye-bulging deals.
Such acquisitions wouldn’t suggest buyer confidence at the top end is wavering and glancing back over sales way back to 2006 shows just how insulated the prime property sector is from both the mainstream market and the economy in general as values and volumes have continued to soar.
The Olympics this summer effectively puts the capital in the shop window and it would come as no surprise if the event further enhances the profile of London as a desirable destination for the world’s wealthiest property buyers and investors.
Add all these factors together and recession or no recession, it is very much a case of business as usual for London’s prime property market.