Gold Cup day at Cheltenham can be an interesting barometer of the health of the UK and Irish property markets.
The talk this year was not so much about the property recession in Ireland or the euro bailouts but the relentless rise in residential property values and rents in central London.
While it’s not unusual for Olympic cities to experience small rises ahead of the event, not least seen in Vancouver in 2010, the fact that values are now at least 20% higher* than their pre-crunch peak in 2007/2008 confirms the status of prime London property as a global store of value. This status has been well understood in the Middle East, Asia and Russia for many years and is now attracting European tax émigrés as London is a seen as a safe haven. The question is – are we looking at a property bubble or, as I suspect, are we seeing global investors pour into prime London property as central banks continue to devalue their own currencies?
The alternatives for the flood of liquidity being created across the globe are decreasing by the day and ‘real’ assets seem to offer a genuine safe haven against the printing presses with Central London property remaining high on the shopping list.
Are we reaching a point where a two bed pad in Mayfair at £3,000 per square foot has a more attractive credit quality than the chancellor’s 100 year loans? Or maybe it is simpler than that. At the end of the day would you rather own an attractive view over London or a government IOU with a negative real yield?
*Source: Savills Estate Agents
Oliver Pearson-Lund is investment manager in the Jupiter private client team.