London’s continued appeal as an investment market is neither surprising nor, evidently, fading. Despite the news about UK real estate, London as an island unto itself remains fairly strong. “The Central London market started recovering at a significant rate in 2009. The rest of the UK has been much slower to rebound,” remarks Blackfish Director Robert Pearce. “London always has the status [that] global capital cities tend to. New York is a good example.”
Perpetual undersupply, global political instability, economic uncertainty and social unrest keep it in its favoured position. With the UK recovering and developers no longer dependent on foreign pre-sales, the offerings — so common in the last year — may get thinner. “The domestic market is firing on all cylinders now, and developers are selling into the local market,” says Pearce. “I think most also sell in Asia is because they think they can get premium prices in Asia. That’s wrong, I disagree and if you go to London now Londoners disagree too.”
Safe and Sound
Other factors in investors’ ongoing love affair with London are the city’s transparency, a frequently imitated legal system and, ironically, value. “The UK and London have been ‘on the radar’ for a long time, but especially since the 30 percent devaluation of sterling back in 2008,” says Colliers International’s Walter Boettcher, director of research, EMEA. “Suddenly, prime London real estate looked even more attractive to foreign investors.”
Jones Lang LaSalle agrees, noting that London’s internationalism is one of its strengths. Over 30 percent of residents in 25 of the city’s 33 boroughs were born outside the UK, with Westminster, Kensington and Chelsea at more than 50 percent. “International demand … is a reflection of the existing international dimension of the London population,” said a JLL March London residential investment brief. “Overseas investors are aware of the local market trends in London and the UK but they are continuing to buy because the fundamentals of London’s attractiveness remain, and compared to other world cities it still looks a good investment,” adds Nick Gregori, residential analyst at Savills Research. Additional “cooling” measures, for lack of a better word, are also not a deterrent the way they have been in Hong Kong. “Additional taxation of £2 million-plus properties held in corporate structures (ATED) has already been brought in and has generated receipts above the Treasury’s expectations. This suggests that buyers have not been discouraged, but rather have continued buying and simply paid the corresponding extra tax,” Gregori points out.
For all the usual reasons the time to buy in London is always now. Though there has been chatter of a bubble, the city’s gains from 2009 are similar to past growth cycles. Nonetheless investors still need to pick the right property at the right price and set the right goals. “It is important for international investors to set real expectations in relation to investment in property,” begins Ali Saber of Marcot Property & Finance. Anyone looking for 20 percent appreciation is setting themselves up for a fall, and rental yields can vary wildly. “There are areas in London that are selling for £3,000 to £4,000 per square foot, so don’t expect to get much for £1 million in prime locations such as Mayfair and Belgravia. Also investors need to be aware that some houses will be harder to sell or rent out than others even if they are in the same location,” he says.
And the “where” is crucial and can affect price and yield. Saber suggests considering how important established districts with low returns but higher stability are and how willing you are to take a risk on an up-and-coming area (Chelsea Creek) or a new spot (like Nine Elms) as an investor.
“If you have a budget of £1 to £3 million and are looking to purchase one apartment in a good location, could rent out easily and could live in yourself then four locations come to mind straight away,” says Saber. “Chelsea Creek, Abel & Clelland in Westminster, Lancaster Gate opposite Hyde Park and the Antrim in St Johns Wood. All of these developments are new, luxurious, secure and have values that have grown over 15 percent during the last 24 months and will outperform market expectation,” he finishes.
Since 2006, with the launch of the refurbished Aragon Tower London has taken after Hong Kong and headed up. Over 30 residential buildings over 20 storeys have been added to the cityscape since then. “A further eight residential towers are due to complete construction this year and another 31 are under construction and due to complete by 2018,” said CBRE in its Towers of London residential report.
Many of those rolled through Hong Kong in the last six months on sales launches, and they ranged from affordable flats on the outskirts to ultra-luxury developments in the heart of the city. Colliers International helped launch Lend Lease’s emerging The International Quarter and Elephant Park, Spring by Hyde Vale, St George’s Saffron Square, Paddington Exchange by Taylor Wimpey, Royal Waterside and Morello Quarter by Redrow and most recently Hoola by Strawberry Star.
Over at JLL, Berkeley Homes brought in Goodman’s Fields, Marine Wharf and Vista, Grove Place, St Mary A Hill, Lovat Lane and Royal Gateway by Galliard, the ultra cool Vibe and Stratford Central by Telford Homes and perhaps the most eye-catching project, the regenerated Artillery Row by LBS Properties.
Not to be left out, Knight Frank offered Land Securities’ Nova, Berkeley’s One Tower Bridge, York Shell and Hyde Park from Euroterra Capital, 33 Blackfriars Lane, by Northridge Capital and the ultimate in regeneration projects, Argent’s massive King’s Cross project with its variety of price points. And in all cases, there’s more where those came from. For how long is anyone’s guess.