There is a conversation I have almost every week. An international client looks at a prime London flat and asks a version of this: “Prices have gone nowhere for ten years. This flat yields perhaps 3 per cent net on a good day. I can buy a UK government bond paying close to 5 per cent — risk-free, liquid, no tenant, no service charge, no roof. Talk me out of it.”

And the honest answer is: on those terms, I cannot. So I do not try.

The arithmetic, without flattery

Look at it coldly. The gilt pays roughly 4.8 to 4.9 per cent, backed by the same government whose country you are buying into, with none of the friction. The flat: gross yields in prime central London run about 2.5 to 3.5 per cent, and net — after service charge, management, voids and insurance — you are frequently closer to 2. Entry costs, including stamp duty with the additional and non-resident surcharges, can absorb years of that thin yield before you have recovered them. And the capital growth that used to rescue the whole equation has been absent: prime central London remains roughly 22 to 23 per cent below its 2014–15 peak, and broadly flat in nominal terms over thirteen years.

On income alone, in today’s market, prime London against a gilt is not a close call. The gilt wins.

So why does anyone still buy?

Because my clients are rarely buying income. Three real reasons keep serious buyers transacting, and none of them is yield.

Capital preservation. For families from less stable jurisdictions, London property is not competing with a gilt; it is competing with holding wealth at home. It is a safe-deposit box you can live in — transparent title, deep liquidity, a legal system that holds — and the negative carry against a bond is, in effect, the insurance premium.

Currency and price. For a dollar or Gulf buyer, sterling is cheap and the asset is a fifth off its peak. They are buying the discount and the currency, not the rent.

Use and continuity. A home for children at university, a base for the family, an asset the grandchildren inherit. A gilt is a five-year trade; these buyers hold for generations, and the comparison was never truly like-for-like.

The honest conclusion

If you are buying prime London for yield, the gilt is the better trade today and it is not close. If you are buying it for preservation, currency, or the life your family will live in it — that is a real case, but it is a different one, and you should be clear-eyed about which case you are actually making.

Property can still make excellent sense. The reason simply needs to be more specific than “it’s London, it always goes up.” It has not — and knowing that puts you ahead of most of the market.

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Aldo Attanasio d’Aponte is the founder and chief executive of Arbitrage Group, a boutique buyer-side advisory specialising in prime central London real estate. Market figures are approximate and correct at the time of writing. This article is general commentary and not financial, legal or tax advice.