20 August 2010, Freehold Monthly (Dubai)
London has long been one of the world’s truly global centres. The financial powerhouse of Europe, the UK’s capital is home to some of the most prestigious real estate around and has been a consistent location of choice for investors in the Gulf looking to put their money into overseas property. And when you take a closer look at the market, argues Camilla Dell, managing partner of independent search agency Black Brick Property Solutions, it is easy to understand the attraction. “We have a ‘transparent legal system’ for property ownership and a ‘light touch’ regulatory system,” she says. “Compared to the US, it’s much simpler and more straightforward for companies to incorporate in the UK and there is a favourable tax system for overseas investors as they do not pay capital gains tax if they have lived outside of the UK for over five years and spend less than 90 days a year in the UK,” she says.
As a property market, London has very tight planning restrictions compared with other urban centres, creating ‘prime’ spots. “The whole of prime central London is popular, but particular areas such as South Kensington, Kensington, Chelsea, St John’s Wood, Regents Park and Hyde Park are all very popular with tenants and make sound and stable rental investments,” she says. “The key to a successful investment is ensuring you end up buying in an area that will rent easily and to a good tenant and also an area that will show capital appreciation over the medium- to long-term.”
Dell advises first-time buyers to avoid deals that look too good to be true. Often, apparent ‘bargains’ can be explained by a little local knowledge. “We tend to avoid areas that are far from the Tube or public transport, and areas outside of what we term as ‘prime central London’, which is essentially a six-mile square radius,” she says. “While yields and prices may look more attractive in secondary and tertiary areas, the further out from central London you go, the harder it will be to secure a tenant and the potential for capital appreciation will be less, as there is less demand. Lastly, if you ever needed to sell your property quickly, it will be much harder to sell in a less desirable area. Prices also tend to be much more resilient in a downturn in the prime areas, as evidenced by London’s quick recovery since September 2008. Prices in prime central London are almost back to peak levels.”
But buying in central London is not always a clear winner. Despite a transparent legal scheme, it is all too easy to be taken for a ride by agents who know the anomalies and peculiarities of the London market like the back of their hand. “People rarely hesitate to seek professional advice when investing in the stock market or assets such as art, and the property market should be no different,” she says. “This is especially true for those looking to buy in unfamiliar markets, and in London there are certain pitfalls that foreign homebuyers can avoid by employing a reputable search agent.” The London market is unique and very complex and values can fluctuate significantly from one area to the next, from one side of the street to the other, or even between floors in apartment blocks, says Dell. “These subtleties in value are something that independent search agents are able to advise on, and experienced negotiators will always ensure properties are secured for the best possible price.”