Alistair Walsh | 22 April 2013

London luxury property market price growth unsustainable: Grosvenor Group

The luxury property boom in London is unsustainable, according to Grosvenor Group, the £5.8 billion investment group.

It told Reuters that the rate of luxury home price growth in London looks shaky after years of foreign investment in the safe-haven market.

Luxury home prices there have increased 53% since 2009 compared to 25% in the rest of Greater London, according to Knight Frank.

The influx of cash came as investors sought refuge from Europe's debt crisis and political uncertainty in the Arab world and Russia.

"The extremely high rate of growth over the last two, three years is a thing I'm concerned about and I think it's probably unsustainable," Grosvenor's chief executive Mark Preston told Reuters last week.

"As those crises recede then perhaps there's less interest in capital moving internationally for safe haven reasons.  (And) we're reaching values in prime London that are just extremely high by historic standards."

He said the group would now focus on diversifying the business by investing in Canadian residential and British rental homes to offset the risk of slowing price growth in the luxury housing market.

According to Knight Frank, London is the third most expensive place in the world to buy a house after Monaco and Hong Kong.

Grosvenor Group owns most of London's upscale Mayfair and Belgravia districts. It is headed by Gerald Grosvenor - the Duke of Westminster – with a £7.4 billion fortune. 

Last month the group sold a 50% stake in the Brisbane tower 400 George Street to South Australia’s Motor Accident Commission for $195.8 million. It is also looking sell the Bank of Queensland building at 259 Queen Street for a reported $190 million.

And, along with Leighton Properties, it sold the Eclipse Tower in Parramatta to REST Industry Super for $167.5 million last November.

According to Reuters, its London estate, which it has owned for more than 300 years, comprises 300 acres of Mayfair and Belgravia with more than 1,500 homes, shops and offices as well as investments in China, Europe and North America and a fund management arm.

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