London houses still seen as a safe haven for investors

21 November 2014, The Times

Unfavourable exchange rates and prospective tax changes have not deterred international buyers from buying expensive properties in central London, say property finders, as many prepare for one of their busiest Christmases ever, despite low levels of housing stock.

Penny Mosgrove, chief executive of Quintessentially Estates, has about 50 viewings booked for December, compared with only ten over the same period last year — with her final one booked for December 22.

“We’re usually looking forward to some festive lunches with agents about this time of year,” she says, “but overseas buyers are being much more industrious than they usually are — it really is unheard of to have something booked quite so close to Christmas Day.” Most of Mosgrove’s clients — from countries all over the world, including America, China and India, often keen on huge lateral apartments in Georgian town houses in classic London locations such as Eaton Square — have visited London before looking for property. Only one has mentioned concerns about the mansion tax on properties over £2 million mooted by Labour and the Liberal Democrats, she adds.

“At the beginning of the year some of our clients felt prices were sky high and some suggested they should wait. After the Foxtons share price fell, I think many felt conditions might be more buyer friendly and were keen to move quickly. Now, I think they are very keen to get something sorted by the new year, as are many sellers.”

Shares in Foxtons, which floated on the Stock Exchange last September, tumbled 20 per cent in October after the London-focused estate agent chain warned that profits would fall this year because of a sharp slowdown in the capital’s property market. In its statement, Foxtons said: “Although the longer-term outlook for London property markets remains positive, the market is expected to continue to be constrained for some time due to political and economic uncertainty within the UK and Europe, tighter mortgage lending markets, and mismatches between the price expectations of buyers and sellers.”

Although London house prices have driven much of the headline growth in recent years, the market in the capital has seen a distinct cooling since the summer. The past year has had the highest number of sales since 2007, however average stock levels held at estate agents fell to an average of 60 properties, a record low in November, according to Rightmove. New properties coming on to the market in November slumped by 15 per cent on last month and are 1 per cent down on a year ago, meaning that househunters eager to purchase before the new year may struggle.

International buyers still consider London’s property market to be a safe haven, insist agents such as Mosgrove. However, many are now more determined than ever to secure a bargain, even in the upper price brackets.

Overseas buyers are finding they have to dig deeper to acquire properties within the capital because of exchange rates, according to a report by Garrington property finders seen exclusively by The Times. Russians have seen the highest rise, with the equivalent cost of a home in prime central London bought in roubles rising 37 per cent in the past 12 months. By contrast, sterling buyers in prime central London are now paying by comparison, on average, just 13 per cent more. Buyers from mainland Europe are finding prices (in euros) are now 21 per cent higher and purchasers with US dollars (and those with dollar-pegged currencies from Hong Kong and Singapore) are now paying 17 per cent more.

Why? “Rising house prices, a strong economy and a strengthening pound against many foreign currencies. At the same time, in the case of Russia, the rouble has fallen dramatically as a result of UN sanctions and [there is] economic volatility due to the Ukraine crisis,” says Nicholas Finn, executive director of Garrington, who adds that many vendors are now open to offers and that, with transactions in prime central London down nearly a fifth, there are more opportunities for savvy British buyers. “With the cooling of the market, and levelling of prices, there is an appealing environment created for those decisive buyers looking to make a sound property investment.”

Negotiations that result in discounts of up to 10 per cent on properties popular with overseas buyers are now much more common than they were a year ago, adds Finn, who recently helped a client to buy a £1 million flat in Great Minster House in Victoria for £900,000 off-plan. Garrington client numbers have doubled year-on-year, and this includes a substantial increase in British buyers too.

Although there is a common perception that buyers from the Middle East and Russia dominate the market in prime central London — particularly in areas such as Belgravia, Knightsbridge and Mayfair — research from the independent property buying agency Black Brick suggests that it is in fact African buyers who dominate the market. The agency analysed its own sales data from 2007 onwards and counted 35 different nationalities, with Africans forming the highest percentage of buyers at 43.7 per cent, followed by Middle Eastern buyers at 17.1 per cent, with Asian and UK buyers tying for third place at 10 per cent each. Egyptians had the largest average budget, at £5.175 million. Budgets for investors, who make up 40 per cent of all buyers, have fallen from an average of just over £2 million in 2007, to over £1.4 million in 2014.

Black Brick has dealt with buyers from Nigeria, Kenya, Zambia, South Africa and Uganda, notes Camilla Dell, managing partner at Black Brick. “Many wealthy Nigerians were educated in the UK and send their children to school here. Typically, they like gated, secure developments, as this is what they are used to back home.”

Many Africans prefer new-builds such as Imperial Wharf, says Dell, adding that some people refer to this development as “mini Lagos”. Belgravia and the SW3 part of Chelsea are also popular. “Thirty-nine per cent of our Nigerian clients have bought in either SW3, SW10 or SW1, closely followed by 35 per cent buying in northwest London postcodes such as NW8, NW6 and N2.”

 

 

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