How long can London property defy the national market trend? House prices in London rose in December, notwithstanding those elsewhere in the U.K. stayed flat or fell, says the Royal Institution of Chartered Surveyors. Prices in prime central London are now around 16% higher than their September 2007 peak. Some estate management experts foresee further 25 percent rises by 2016, as overseas investors continue to seek safe berths for their cash. But downward pressure is likely to increase this year.

Buyers from abroad now account for over fifty percent of the sales of London’s most sought after residences, helping shield the market from a domestic downturn. Many have large chunks of equity to invest, so are less affected by the mortgage lending squeeze.Sterling’s recent weakness against many currencies, down 20 percent against the US dollar since the start of the credit crunch, has added to London’s temptation, while extremely low interest rates have distressed sales down.

And then long as the economical doubt continues, the wall of foreign cash flowing into the British capital property, approximately £6 billion in the 18 months to mid-2011, will likely be maintained. However, the high end of the market is easily affected by the global picture. If the euro crisis is resolved or the world economic outlook improves, then overseas investors might turn to riskier, higher-return markets. Sterling increases or other commodity price failures could also determine demand negatively.

London housing & commercial property to let is certainly not cheap by any standards. Yields are low at 3.9 percent compared to 5 percent in the rest of the U.K. housing market and up to 7% for prime offices in most European capitals. Staggering prime central London rent, up 25 percent since the summer of 2009 have given some support to high valuations, but approximately 55 percent of “prime” tenants work in the financial services industry, where large job losses are expected to have to be made soon. Profits are likely to remain flat until 2016, forecast estate agents.

Meanwhile, for a first-time buyer the average house price in London is equivalent to 7.8 times earnings, compared to an average of 4.8 times across the country estimates website Findaproperty.com. Such a disparity looks unsustainable — and provides a strong incentive for capital-dwellers to relocate and investors to seek better value elsewhere.