While the property market in the UK may be on course to deliver more consistent and sustainable growth in 2016, the luxury end of the sector appears to be in slightly more peril.
This was reflected in the reported decline of property price growth in prime, central locations such as Kensington and Chelsea, where values increased by just 1% during the final financial quarter of 2015.
This would suggest that the luxury property market in London and the UK may be about to experience a downward turn, especially if investors believe the portents for a great recession in the year ahead. The investment world is increasingly diverse, however, meaning that the property market could be about to find a boost from the most unlikely of sources.
More specifically, investors from Iran could be set to commit huge amounts of capital into the London property market. This influx of cash is likely to create swathes of new opportunities within the market, enabling home-owners to capitalise while the market retains a semblance of growth and momentum. It is also likely to increase demand for luxury property in London, driving higher price points at a time when the market was beginning to record noticeable depreciation.
So how has turn of events come about? Essentially, Iran has recently benefitted from
the lifting of severe economic sanctions, which have been in place since the 1970’s. Despite the fact that these sanctions became more stringent in the event of controversy surrounding the nations’ nuclear ambitions at the turn of the century, tensions have eased over time and created a climate that is far more responsive to the idea of international investment.
Initial estimates suggest that the lifting of these sanctions has unlocked up to £70 billion of Iranian assets, many of which are being aimed at luxury real estate in the UK capital. This is a huge boon for luxury home-owners in London, who have watched from afar as diminishing oil prices in the Middle East, the Chinese economic downturn and the onset of a recession in Brazil have combined to slash the level of investment made into the capital.
In the coming months, Iranian money could become a huge factor in London real estate and make a pivotal difference in an increasingly precarious marketplace. After all, it was not long ago that experts were forecasting a global recession and property market downturn, while also predicting an increase in demand for quick house sale services as home-owners look to recoup their initial investment.
The level of sentiment has improved on the back of this news, however, as the economy braces itself for a huge influx of cash throughout the next two financial quarters. A surge of international investment from Iran will also lend further weight to the thriving rental market in the UK, which is already expected to increase by 7.5% annually over the course of the next two decades.