Central London's 'Foreign Buyer' Redefined

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International home buyers have long been a part of London's prime central residential market, but the "foreign buyers" are increasingly U.K. residents, according to a new report. 

Based on nationality, 49 percent of all purchases £1 million and higher in prime central London were by foreign buyers in the year to June. However, only 28 percent of buyers were not U.K. residents, and most were investors looking for rental income, a study by Knight Frank found. 

"Once we begin to consider residence, we can understand more clearly where investment flows are originating," Liam Bailey, global head of residential research, Knight Frank, said in the report. "Our analysis confirms that Europe, the Middle East and Russia are leading the field on both measures - as a source of buyer nationalities and as key hubs for non-resident purchasers." 

The number of foreign buyers increases both by nationality and residency when assessing the new-build home market, which is more attractive for investors, the firm says. In the two years to June, 69 percent of prime central London new-build purchases were by foreign buyers by nationality, while 49 percent were non-U.K. residents. 

Analysts agree that foreign buyers are driving sales in prime Central London, where prices are up 5.5 percent so far this year. A report from Savills showed buyers from Hong Kong and China were the largest group of buyers in London's new-build market, accounting for 27 percent of the market by volume.

Knight Frank researched new-build properties sold to foreign owners in the two years to June in all 33 London boroughs to measure the foreign influence across Greater London. 

While 51 percent of new-build purchases were by U.K. residents in the prime central London market, the U.K. buyers accounted for 80 percent for the remainder of inner London. The number was larger across outer London, where U.K. residents accounted for 93 percent of sales, Knight Frank found. 

In the two years of research there is no evidence of higher non-U.K. resident purchases outside central London, the firm concluded.

"While some developers have noted rising interest from overseas buyers in areas outside central London, these appear to be localized examples," Mr. Bailey said in the report. "Our research points to the fact that the majority of demand for new-build property in London from overseas remains focused on the relatively small and concentrated market made up of the central London post codes."