23 Jan 2013
Global property reports reveal that overseas continue to search for premium real estate in locations offering more than just excellent investment opportunities, such as lifestyle and education.
The Knight Frank report entitled: “International Residential Investments in London” shows that overseas investors channelled £2.2 billion into the new-build sector in central London in 2012 up from £1.8 billion in 2011.
A third of investors buying off-plan buy property with their children’s education in mind, planning to use at least one property for their children to live while they attend a London university.
According to Savills UK research department, in 2011/2012 overseas buyers accounted for one third of buyers in all prime London property and 58 percent in central London.
Overseas buyers are even more important to the development market, where approximately 65 percent of purchasers in prime London and 70 percent in prime central London are from overseas.
The report notes that two thirds of overseas buyers across prime London are purchasing their main residence, and in central London the figure is just under half.
In recent years prime central London has seen the strongest recovery, with prices averaging 22 percent above their third quarter 2007 levels.
Writing in the report, Gráinne Gilmore, head of UK residential research at Knight Frank, says London is hailed as a ‘safe haven’ location offering a transparent property market and property tenure is clear cut and underpinned by the legal system.
“Given that it is such an established market, there are also good liquidity levels in every price band compared with some less established global hubs,” she says.
She says London is also physically and politically safe and while there have been some property tax changes recently, there have been no widespread ‘wealth taxes’ imposed unlike in France or Spain.
Knight Frank says the surge in European buyers in recent years can largely be attributed to the crisis in the Eurozone.
Buyers looked to diversify away from Euro-denominated assets, given the insecurity about whether the Eurozone would remain intact.
The pound also fell against many other currencies in the immediate aftermath of the economic crisis, and remains weak, offering buyers, especially those buying in US dollars or currencies linked to the dollar, an effective discount on purchasing property in London and the rest of the UK, according to the report.
Furthermore, the lure of world renowned schools and universities in and around London cannot be overstated, hence a third of buyers of off-plan new-build properties do so with their children’s education in mind.
London is among the top cities when it comes to tertiary education – it boasts 12 universities ranked in the top 700 world institutions, according to QS – rivalled only by Paris with 16. Berlin, Zurich, Milan and Amsterdam have fewer than five.
According to the report, the lure of a British education is nothing new, and many investors may have been educated in the UK themselves, or have family or friends who have done so.
In fact, when we surveyed high-net-worth individuals about what attracted them to invest in London property, one of the main reasons given was the network of contacts they already had in the city, explains Gilmore.
According to Dr Andrew Golding, chief executive of the Pam Golding Property group, thanks to the Eurozone crisis, the London market remains resilient and appealing, and continues to perform well with sound growth both in terms of capital values and rental yield for investors including South Africans.
He also points to London as being a ‘safe haven’ location particularly among high net worth investors worldwide.
Demand outstrips the supply of housing stock generally, further boosted by the fact that since the year 2000 an additional 400 000 jobs have been created in London across a broad range of sectors.
“This is coupled with the fact that London offers broad benefits as a desirable place to live and work,” says Dr Golding.
Savills also report that a record number of London homes worth £5 million plus changed hands in 2012 as demand for the capital’s residential real estate remains strong despite increased taxation announced in the UK’s spring Budget.
“Traditionally, London has proven a popular location for South African buyers, many of whom have family overseas or require a London residence for part-time business or personal use,” says Jane Clough, London sales manager for Pam Golding Properties International & Projects Division.
Clough says they are currently marketing a number of sound investment opportunities, which are conveniently positioned and comprise lock-up-and-go apartments in accessible price ranges for South African buyers.
These include Embassy Gardens, on the South Bank of the River Thames in London, a 200 unit residential development that comprises suites, one, two and three bedroom apartments plus penthouses priced from £655 000.
The development will have leisure facilities including a cinema, pool, business centre, games room, residents’ bar, gym and spa as well as retail component.
In the Regent Quarter in London, N1, 35 one and two bedroom apartments are priced from £445 000 – some with outside space.
The units will be completed in March 2013. In addition to the residences, Regent Quarter incorporates offices and a hotel, she adds. – Denise Mhlanga
Denise MhlangaProperty journalist at property24.com
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