Working asset in London property

Our research shows that the supply of prime central London stock available through our London offices, Kay & Co, is now 30 per cent less when compared to the same time last year. Demand from domestic buyers is steadily rising as confidence returns to the economy, but the market is still dominated by the overseas investors.

The Middle East in particular has become a major force in the housing market once more due to recent uprisings. A recent report by a leading property consultancy ranked UAE nationals as the fourth most likely to grow their share of purchases in the London property market within the next year.

A recent article in the Financial Times ranked the UAE as fifth in terms of average spend on UK property at just under £5 million (Dh29.88 million), behind Egypt whose average spend was just over £5 million.

Non-UK buyers

China led the way with an average spend of £6.5 million, followed by Malaysia, Hong Kong and Russia. Over the last 12 months the proportion of £2 million plus sales which have gone to non-UK buyers hit 52 per cent. Above £5 million, the figure was 64 per cent.

Prices in the UK capital fell during the summer and autumn of last year. But since then, prices have started to grow and in the four months to the end of February they rose by 4 per cent.

While the rest of the UK housing market continues to stagnate, London can attribute its ability to buck the national trend to the low level of supply and the ability of buyers to fix their borrowings at very low costs once again, subject to them having a favourable loan-to-value ratio.

This is likely to continue for now as the Bank of England Monetary Policy Committee decided to keep the base rate at it's record low of 0.5 per cent for April.

It will be fascinating to see the minutes of the MPC meeting when they are released next Wednesday to see if the committee is still split on the way forwards.

According to the latest set of figures from the Council of Mortgage Lenders (CML) mortgage lending increased slightly in February following a particularly lack-lustre January.

Loans for house purchases climbed 8 per cent by volume and 5 per cent by value in February to reach 32,300 loans, worth £4.6 billion.

However this represents a 12 per cent decrease, by volume and value, on February 2010.

Re-mortgage lending

Re-mortgage lending also increased in February, from 23,200 to 24,300 loans worth £2.9 billion, up 5 per cent in volume but unchanged in value from January. That is up 3 per cent by volume and down 3 per cent by value from the same month last year.

The latest poll carried out by the Bank of England has indicated that lenders were at their most positive in two years about the prospects for mortgage availability.

If this is correct it may once again make the market more accessible for those with smaller deposits and we may finally see the return of first time buyers to the market.

This lack of supply has had a knock on effect on the lettings market where many would-be buyers at the top end of the market are now forced to rent expensive homes in the absence of anything to buy. Rents, which have been steadily rising, are likely to continue to do so.

Many are now looking at London real estate as working assets that will produce a decent return in the medium- to long-term.

The key is knowing not just when to buy but what to buy and how to asset manage the property in a way that maximises returns.

The writer is chairman of Kay & Co, a London-based estate agency.