Bloomberg News

Chinese Cut Back on London Luxury Homes as Stock Losses Bite

December 15, 2011

Dec. 15 (Bloomberg) -- Chinese investors’ share of prime London home purchases in the city’s most expensive neighborhoods fell by more than half in the third quarter as stock market declines hurt spending power, Hamptons International said.

Buyers from the world’s second-largest economy accounted for 4.9 percent of sales in Chelsea, Kensington, Knightsbridge and Belgravia in the three months through September, down from 12.6 percent in the previous quarter, said Adam Challis, head of residential research the London-based property broker. They represented 10.6 percent of the purchases in the three months through March.

“A lot of Asian wealth that’s spent on property is tied to the performance of equity markets,” Challis said in an interview. “When they wobble, there’s less money to spend.”

The Hong Kong Hang Seng Index fell 22 percent and Japan’s Nikkei 225 Stock Average retreated 15 percent in the two months through September, as Europe’s sovereign debt crisis damped global investor confidence.

Chinese buyers have been increasing their share of London home purchases after China’s government took steps to cool the country’s real estate market and avoid a bubble. Foreign investors have also been attracted to the U.K. capital after the British pound lost about 24 percent of its value against a basket of currencies since the housing market peaked in the third quarter of 2007.

London Attraction

Buyers from Asia accounted for the majority of new home purchases in central London for the first time in the six months through April, according broker Knight Frank LLP. Most were from Hong Kong and Singapore.

Home values in expensive neighborhoods such as Kensington and Knightsbridge may rise as much as 13 percent this year as buyers compete for a limited number of properties on the market, Challis said in a report today.

“Prime owner-occupiers move less often, further restricting the supply of for sale properties at any one time,” he said. “The supply constraint for existing stock is an endemic feature of prime property.”

U.K. buyers accounted for around 44 percent of London luxury home purchases in the third quarter. About 19.5 percent came from the European Union and 14.6 percent from the Middle East.

--Editors: Ross Larsen, Jeff St.Onge.

To contact the reporter on this story: Chris Spillane in London at

To contact the editor responsible for this story: Andrew Blackman at

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