Prime London property is a safe-haven against the volatile economic climate; where inflation, foreign exchange rates and zero-rate interest are all combining to suck away the value of cash savings. Gold is arguably the ultimate safe-haven asset, and it is only when the price of gold sky-rocketing sparked fears of a bubble, that real estate in places like London really became a safe-haven favourite.
However, according to the latest report from Knight Frank, anyone who picked property over gold on the fears that the latter was at risk of a bubble has hampered their wealth-growth potential.
According to the report the average value of super-prime property – properties worth over £10 million – in London has increased by 40% since March 2009. During the same period the price of gold has risen by 89pc to $1,786 a troy ounce and in gold terms the value of a luxury London home has plunged.
Liam Bailey, head of Residential Research at Knight Frank, said: "In 2002 it would have taken you 24,000 ounces of gold to buy a super-prime mansion in SW1. A decade on, you would get change from 9,800 ounces."
So, on the face of it, it looks like those investors buying a prime property in London may have been better to invest in gold, but when you dig deeper it becomes less clear cut. If you widen the time-scale; the value of prime property in London has increased by 2576 per cent since 1976, while precious metal values have increased by just 802 per cent during this time.
Safe haven investors are looking to hold these assets for safety over the long term, or at least until the world gets back to normal. With the value of gold still looking like a bubble, and property having the growth and resilience proven in its historical stats, many safe-haven investors will continue to choose property over gold.
- Tuesday 09 October 2012