The affluent in the euro zone are moving money into hard assets valued in something other than euros
Britain may be in recession, but business is booming for Rupert des Forges, a real estate agent in one of London?s most expensive neighbourhoods.
He expects it will take just a few weeks to find a foreign buyer for a 1,530 square-foot, or 140-square-metre, apartment within a mansion, with concierge, in South Kensington that is listed at ?3.25 million, or $5 million. Someone recently bought two larger properties nearby for around ?7.5 million apiece. The buyer was an investor eager to move cash out of the euro zone ? in that case, Italy.
From Italy, Greece, Spain and other countries in the European currency union, the affluent these days are moving money into hard assets valued in something other than euros, which have been plunging in value.
Expensive London apartments, valued in pounds, fit the bill nicely.
?Interest from buyers is closely connected to the politics of Europe,? said des Forges, a partner at the Knight Frank agency who has been in real estate for 23 years and who said he has ?never worked harder?.
Flight of cash now poses one of the big financial risks for the euro zone. According to Spain?s central bank, a net 66.2 billion euros flowed out of the country in March, the most since records started being kept in 1990. And analysts expect signs of an even brisker outflow when new data become available.
Although prime London real estate has long been an attractive investment for the foreign wealthy ? whether in Russian rubles, Chinese renminbi or Saudi riyals ? more buyers from Continental Europe now seem eager for sterling-denominated properties. They are aided by the European Union?s guarantees of free movement of capital among its 27 members, making it easy for the rich to shop across frontiers. And they are abetted by London realtors who specialise in foreign investors.
It is not only the euro zone?s biggest trouble spots that are sending money London?s way. French investors also are seeking havens in Kensington and Chelsea, des Forges said. So are buyers from Germany, whose banks and bonds are widely considered safe harbors in the euro zone.
In this part of London, close to the Royal Albert Hall, most of the purchasers of similar apartments are foreign and more than half are from the euro zone, according to Knight Frank.
?Safe-haven flows associated with fears about a messy end to the euro debt crisis have boosted prime central London property prices over the past two years,? according to a report published last week by Fathom Consulting and commissioned by Development Securities, a property developer here.
Foreign buyers were not willing to talk about their purchases for this article, and real estate agents spoke on condition that their clients not be identified.
With all the upheaval in the euro zone, buyers from the region have the long-term worry that a break-up of the currency union, if it came to pass, would result in their assets being re-denominated in a new, devalued currency.
But even shorter term, with the euro?s value now near two-year lows against the dollar and the pound, and no bottom in sight, they see a de facto devaluation already under way. Euro zone buyers have helped push up the average price of a home in the exclusive borough of Kensington and Chelsea to more than ?1 million for the first time, put over the top by a 3.6% increase in April.