We’ve heard the London story. With everyone in a state of either flux or panic, United Kingdom real estate is the best, safest, smartest place to invest, particularly in London property. Financing for UK residents is difficult, sending developers overseas for investors, primarily to Hong Kong. “[Hongkongers] love property. They get property investment and they will walk into a hotel room at 11 in the morning and leave at lunchtime having exchanged contracts … In the United States that wouldn’t happen. It wouldn’t happen in the UK. It would take three weeks whilst lawyers fiddled around with a brand new vanilla contract. But they do that in Hong Kong,” notes Tom Eshelby, residential director at Land Securities.
And buyers indeed have to be savvy when it comes to London. Most launches claim properties are “centrally” located and “minutes from Canary Wharf,” surrounded on all sides by major attractions. Yield focused investors may buy in the City, but truly global buyers want to live in the core, anywhere from Hyde Park to Trafalgar Square. In truth, creative diagramming can make a property seem more prime than it really is.
But Hong Kong investors know that, which is part of the reason it’s the first sales stop. Historical connections, education, benign tax and legal structures as well as being a smart way to manage wealth (current exchange rates are favourable) don’t need explaining. Popular thinking also sees Hong Kong as a gateway in both directions to China, though Eshelby would call that a “slow drip.” But ultimately London is welcoming and developers know it. “For an Asian investor, or wherever you’re from, it’s a multi-cultural centre and so I don’t think people feel particularly foreign. Does a Hongkonger buy in Frankfurt and enjoy it?” Eshelby asks. “Asia has been the most important market for UK developers for at least the last 20 years, mainly for those reasons.”
Land Securities was one of the flurry that hit town in January launching Kings Gate in the Victoria district. It’s part of a larger plan to revitalise truly Zone 1 Victoria over the next decade. A stone’s throw from Westminster Abbey, the Houses of Parliament, Buckingham Palace and the busiest transport hub in central London, “It’s not overstating to say this is the heart,” states Eshelby. Victoria fell on dull bureaucratic times as a post-war centre for justice, faith and public administration, but as Eshelby notes, “Prior to that Victoria was overwhelmingly residential; it was quite grand and glam but the bulldozers moved in and built these civic things and it lost the cache versus its glam neighbours at Belgravia, Knightsbridge and Chelsea.”
As Hysan is to Causeway Bay, Land Securities is the primary mover and shaker for Victoria’s regeneration. Kings Gate was an existing asset, and it follows commercial developments at Cardinal Place, Victoria Square, and Wellington House residences. Forthcoming are Buckingham Gate and the mixed-use, nearly one million-square foot Victoria Circle. “It may not have been cool or glamorous, for a few years, but [Victoria] is relevant … It’s been identified as various big surveying firms as the next place to be.”
Economic fundamentals aside, why is London so hot right now, and will it last? As Eshelby sees it, “Whether the market goes up or not is not for me to say, but I do genuinely believe that Victoria will outperform most other parts of central London.” Conceding the city is something of an island within the UK, the next 30 years should look like the last 30: Good. Though a supply crunch underpins the market, broad swaths of non-core development, such as the Battersea Power Station project, are happening. However, 16,000 new flats in that “other” market put investors at distinct rental disadvantage. “Ninety-five percent of London is subject to things like unemployment, mortgage restrictions, economic uncertainly. Central London is simply another kettle of fish. I don’t see that supply/demand dynamic ever being anything but favourable.”
Finally, London should retain its Londonness, another reason many buy there. Eshelby will admit to a sterility factor settling in and draining some its soul away. Gone are the swinging Chelsea of the ’60s, the funky Notting Hill of the ’80s and the charmingly frayed Belgravia of the ’90s. But the ultra-wealthy exclusivist bubble expanding out from One Hyde Park hasn’t killed London’s cool factor yet. For now, Eshelby is confident that young professionals, small businesses, and services staff (teachers, chefs) who remain in spots like Victoria will keep London London: UK law demands private developers provide a fixed percentage of affordable housing, overall a good idea. “The [development] sector has a huge responsibility, and it’s not just altruism,” Eshelby finishes. “We all want a nice community.”