As this issue of the newsletter goes to press, Europe is nervously awaiting the outcome of a referendum in Greece as to whether its people should accept the terms of the ‘final’ bailout offer. More than ever, the risk of Greece crashing out of the Eurozone looms over the continent and, especially, over Greek savers, who could see their wealth slashed by the effect of any devaluation on domestically held assets. As we have seen time and again, economic (and political) instability brings buyers to London’s prime property market. In recent weeks, we have been advising a number of Greek clients on potential investments in the UK.
Of course, Greece’s super-rich have long been a feature of the top end of London’s property market, but the country’s recent woes have seen a different type of buyer arrive from Athens. Middle-class Greeks are looking to acquire London property as a hedge against the effects that a return to the drachma would have on pensions and similar investments held in Greece. They are typically looking for investment properties up to the £1 million mark that can provide stable income and hold their value.
It is London’s near universal appeal to international property investors that provides that stability, especially at the prime end of the market. Buying activity from particular jurisdictions may ebb and flow, depending on local conditions. For example, demand from Singapore, which accounted for 4% of buyers a year ago, according to agent Knight Frank, has fallen by three-quarters in the last six months. The Singaporean authorities have imposed restrictions on mortgage borrowing to prevent a domestic property bubble, with knock-on effects on Singaporeans’ ability to fund international real estate purchases.
But the (likely temporary) departure of Singaporean buyers is being offset by growing interest from elsewhere. As well as increased inquiry from Greece, we continue to see growth in demand from China and, to a lesser extent, from Thailand.
Indeed, property in general, and London in particular, remain squarely in favour among the world’s rich. A survey of wealth managers from Savills and Wealthbriefing found 90% of their clients are planning to increase or maintain their allocations to real estate. And, according to a recent study of ultra-high net worths, London remains second only to New York as a destination for prime residential property investment.
London offers international buyers a large number of new-build developments that, on the face of it, might seem like a more straightforward proposition than navigating the secondary market – but there can be a high level of complexity involved. Not least on price. There is often a surprising degree of price differential between developments that, on the face of it, should be similarly priced. In some cases, these premiums might be justified. In others, they are not.
Part of the reason that developers can charge premium prices is that many buyers go direct, and they lack the market overview that can help them identify better value alternatives. We have also found that the perceived ease of purchasing new-build has led some buyers to overlook the potential of nearby existing properties or period conversions.
Buyers may also be unaware of similar nearby developments that, once completed, could flood the local rental and re-sale markets. Many new-build buyers are purchasing for investment reasons, but they may not have identified the best property for their needs. For example, some contracts preclude re-assignment before completion, which can frustrate investors seeking to benefit from any price rises during construction.
We have recently acted for a buyer who has purchased two new-build properties, one on the Thames, at Nine Elms, and the other near London’s famed ‘Silicon Roundabout’. Both areas are witnessing large volumes of new development, making property selection complex.
In the first case, we secured an apartment at 1, Nine Elms – one of only a handful of developments in London attached to a 5-star hotel, with the amenities that offers. The other purchase, in the Atlas building on City Road, was secured at an attractive valuation and, as one of the first purchasers, we had the choice of apartments within the building. By bringing our market knowledge to the transactions, we helped the buyer secure significantly better outcomes than would otherwise have been the case.
The challenge in this month’s acquisition was finding a dog-friendly apartment, with plenty of natural light, for two returning British ex-pats, close to the shops, cafes and restaurants of Chelsea’s Kings Road. We identified a south-facing top-floor three-bedroom flat in a building that allows dogs in Culford Gardens, a quiet street a short distance from Sloane Square. Given the location, and the quality of the £3.2 million property, interest was, however, high. “We had worked with the agent previously, so we were able to persuade them, based on the quality of our buyer and on our track record, to give us two weeks of exclusivity,” says Black Brick Partner Caspar Harvard-Walls. “That window allowed us to complete negotiations and exchange contracts which, I believe, prevented the sale going to a competitive auction.”
One of London’s undeniable appeals to our clients is the wealth of cultural, artistic and sporting attractions that it offers. The first round games have just begun at Wimbledon while, later this year, London is to host the Rugby World Cup. Mid-July will see Lords host the Australian cricket team for the second Ashes test. These events – not to mention any one of the race meets at courses around London over the summer – would provide an excellent excuse for out-of-town visitors thinking about London property to combine pleasure with business, and tack on a viewing or two. We would be happy to help.