Get set for price of London apartments to spiral to £36m

Property prices in central London are already among the most expensive in the world. If you want to buy an average small apartment in one of the more desirable areas of the capital it will set you back in the region of £1.5 million – assuming you aren’t killed in the rush of overseas buyers waving wads of cash. By the middle of the century, however, this will surge to an astonishing £36 million.

That’s the prediction of investment group London Central Portfolio (LCP), which specialises in property in London’s wealthiest and most exclusive areas, including the Royal Borough of Kensington and the City of Westminster.

LCP’s bullishness is not surprising, as it has just launched a new £100 million fund to buy one- and two-bedroom apartments in the plush areas around Hyde Park – Mayfair, Knightsbridge, Kensington and Notting Hill. It’s already one of the largest investors in prime London property, with more than £500 million of assets under management.

Setting aside the traditional investment warning that past performance is no guarantee of future returns – particularly 36 years into the future – LCP’s forecasts are based on extrapolating the average rise of 9 per cent in prime London property prices over the past 40 years.

Thus a £1.5 million London apartment today (which compares with an average UK price of £250,000) will have climbed to over £6 million by 2030 and to £36 million by 2050, according to its calculations. LCP doesn’t give any indication of what prices will be in real terms by then, although if an apartment costs £36 million, a tall skinny latte will set you back more than today.

The launch of LCP’s new fund, and its extravagant forecast for prices, comes at an interesting time for the central London market, given the escalating Ukrainian crisis.

London has been booming on the back of insatiable demand from wealthy foreign buyers, notably rich Russians. If the West imposes sanctions against Russia, or freezes assets, those buyers will disappear, which could have a significant impact on prices.

It could be exactly what the market needs, however. Just last month, economists at the EY Item Club called for measures to cool down prices in the capital, warning there is a real risk of a housing bubble.

While prices across much of the rest of the UK remain well below pre-crisis peaks, the high-end London market “is increasingly giving us cause for concern”, the Item Club warned. Although they see little risk of a bubble in the wider market, the boom at the luxury end is increasingly trickling down, forcing up prices of average family homes.

LCP, meanwhile, is sanguine in the face of the Ukrainian crisis. Its chief executive, Naomi Heaton, says that even if Russian buyers disappear, they will be swiftly replaced by other wealthy overseas investors - perhaps from the Ukraine.

Payment protection
Millions who were mis-sold payment protection insurance by the banks have missed out again, as claims management firms have skimmed a massive £5 billion in fees from compensation payments.

A report from the Citizen Advice Bureau claims the delay by the banks in agreeing to compensate customers, and delays in settling claims, created the chance for claims firms to “swoop in” and take a huge slice of the compensation.

The total bill for the banking industry has already hit £22 billion – but almost a quarter of that has been grabbed by claims management firms rather than customers. And, according to the bureau, many of those customers are being unfairly treated by the claims firms, who often employ relentless cold-calling and high-pressure tactics.

There are even cases of customers who should have enjoyed a compensation windfall ending up in debt to claims firms, says the bureau.

Fiona Walsh is business editor of theguardian.com