London still calling overseas property buyers
Wed 16 Apr 2014
London still calling overseas property buyers
Despite UK real estate prices rising 9.1% on average, overseas buyers are still firmly fixed on London, where prices have risen up to 30% year-on-year and investors are showing an "insatiable demand", agents say Even with UK property prices rising 9.1% a year on average, most overseas prices will still target prime central London, where prices are rising by up to 30% a year, say market experts. UK house prices rose 9.1% annually to February 2014, up from 6.8% in the year to January 2014, according to the latest data from the Office for National Statistics (ONS). Values rose 9.7% in England, 5.3% in Wales, 2.4% in Scotland and 2.8% in Northern Ireland, with the average home price at 253,000. Annual house price increases in England were driven by rises in London of 17.7%, the South East at 8% and the East of England at 7.7%. England is the only region where property prices are higher than the pre-financial crisis peak of January 2008.
Naomi Heaton, Chief Executive, of investment specialist London Central Portfolio Limited, tells OPP Connect, "The overseas investor would prefer to allocate their money to a global market, such as prime central London, where prices are driven by a lack of supply and huge international demand and which bears little correlation to the UK domestic housing market. It is also a market which has shown very little volatility, even during the credit crunch and shows long-term year-on-year increases of 9%. The only exception to this rule would be if other parts of the country have a credible story to tell, as to why investment should be directed there or where marketing campaigns overseas seduce the unwitting investor."
It should not be a surprise that the UK is experiencing significant property price rises, says Ms Heaton. "Looking at long term growth trends, much of the UK has been in the doldrums since the onset of the credit crunch at the end of 2007. Indeed, prices have only risen by 7.4% since the pre-credit crunch high (which would average out at about 1% a year!). London Central Portfolio, Residential Funds and Asset Managers, had therefore consistently predicted there would be a bounce-back. This growth has been further stimulated by an unprecedented period of low interest rates and the improving long-term employment and economic outlook. "However, this growth is unlikely to stimulate overseas investment or divert the overseas buyer's attention from prime central London. The UK housing market is clearly domestic and will be subject to the vagaries of the UK economy, not least that interest rates will start rising at some point. This will have a negative impact on property prices, as buyers become unable to afford mortgages and owners find themselves over-exposed, as the banks and Help To Buy schemes facilitate overly high levels of leverage."
Paul Smith, Chief Executive Officer of independent agent haart, says home prices in the capital are rising by up to 30% a year. "London is another entity and the rest of the country does not reflect these steep rises. "This will create speculation that a bubble is developing, however, while undoubtedly buyer demand is acute and the supply of homes limited, we do not feel that this is the case. Across the haart network there are around 30 people per branch who have secured a buyer but can't find a new home. With wages edging above inflation therewill be more disposable income and this should encourage people to trade up and increase the supply."
Peter Rollings, Chief Executive Officer of London agent Marsh & Parsons, says there is an insatiable demand for London property from both UK and overseas buyers. "Internationally, prime London property in particular is still seen as an unshakable pillar of investment, and until other forms of investments become more attractive, London property will continue to be viewed as a global reserve currency." Tracey Wong, Executive Director of the Institute of Estate Agents, in Singapore, says Asian buyers are still interested in UK property, despite the forthcoming rise in Capital Gains Tax. "Many Singapore buyers target properties in the UK that are in areas near schools, as they are deemed to be easily rentable or they can visualize the capital appreciation or good rental yields. I believe the recent raise in property gains tax in the UK for foreign ownership of properties may have a ripple effect, but not enough to deter buyers."
House price growth is increasing strongly across most parts of the UK and the annual increase is the highest since June 2010, according to the ONS figures. Excluding London and the South East, UK house prices rose 5.8% in the 12 months to February 2014. The highest average house price is in London at 458,000 with the lowest in the North East at 146,000. The average price for a new home in the UK rose 6% to 245,000 and the resale property average was 254,000.