London shoebox flat may be worth £50m by 2050

How much do you think a wardrobe sized flat in one of London’s poshest post codes will cost in 2050?

It may sound a stupid question, so here’s some extra information to help make the decision.

The current value of a one or two bed flat in a prestigious Central London post code is around £1.5 million and regardless of the economy, prices have steadily improved at an average 9% a year for the past four decades.

Now the calculation is simple – just compound £1.5 million by 9% for 36 years.

And the astonishing price tag is an almost unbelievable £36 million.

£100 million war chest

The figures are predicted by property fund London Central Portfolio, which is pumping £100 million into buying up prime flats in London – which the firm maps as the neighbourhoods around Hyde Park and from Notting Hill to Pimlico.

Investment director Hugh Best said: “We believe the figures are sustainable and as they have been moving at the 9% rate for four decades, we can’t see what might happen to make them change.

“London is the safe haven property destination for the world’s wealthy, especially when they have trouble at home.”

Meanwhile, the latest Knight Frank Prime Global Rental Index, which measures the performance of prime residential rents across 17 cities worldwide, rose by 4.8% in 2013.

The report highlights job losses in the City have seen rents in the capital fall by around 2.5% last year.

Prime rents track top jobs

This is just one symptom of a wider theme that sees the rents of luxury property linked to the city’s employment market performance for big-hitters in the salary stakes – and mostly this means those working in banking and financial services.

The study shows emerging markets leading the world’s top financial centres.

Nairobi, Kenya, saw rents rise by almost 26% in 2013 as multinational companies moved into the city.

Dubai rents ended the year nearly 14% up, but a two-tier market is showing secondary location rents growing faster than those in prime developments.

Tenant demand also rose following the announcement that the city will host Expo 2020.

Although prime rents in Nairobi and Dubai recorded the strongest rate of annual growth in 2013, rents here are between 50% and 70% below those in London and New York.

Rents were down in London, but 3.5% up in Manhattan mainly due to a 15% in Wall Street bonuses while those in the City were frozen or dropped.

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