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With Widespread Work-at-Home, Americans Looking to the U.K. Anew

By Liz Lucking

A new group of U.S. residents are looking to try living across the pond

The number of U.S. buyers in London had been rising for some time, driven by a favorable currency exchange and discounted prices, but now, the coronavirus pandemic and the increasing adoption of working remotely has led to an opportunity for a new group of U.S. residents trying the city on for size.

One of the biggest trends witnessed recently by Guy Bradshaw, head of London residential at Sotheby’s International Realty U.K., is U.S. residents looking for one-year rentals in the city.

The pandemic has resulted in changing work patterns, and now “U.S. buyers and tenants are seeing a window of opportunity to try something different,” he said. “Families are saying, ‘Let’s try the U.K.’”

That’s exactly what one of Mr. Bradshaw’s clients did, a young family with two children from New York, who found themselves a townhouse in central London with a garden, and who preferred not to be named or disclose pricing.

“We chose to move to London as the opportunity presented itself due to the fact that our childrens’ learning has now moved online for the foreseeable future. We feel that it’s a great time to experience a different culture and lifestyle for 12 months or so and see how we adapt to living in Europe,” they responded to Mansion Global over email. “My husband’s work is global, and he can work remotely, so it’s a perfect opportunity for us to try something new.”

For the New York-transplants, being close to a park was a must, they said, as was being able to walk to amenities such as shops and cafes. “We wanted a neighborhood feel within the city as we are used to city life back home.”

London’s time zone—five hours ahead of the East Coast—its business sector, the nationwide health care and the infrastructure, are all considered assets to those headed across the pond, according to Mr. Bradshaw.

Many movers are from major metropolises like New York City and Los Angeles, and typically have budgets of between £2,000 (US$2,587) and £8,000 per week, he said.

They aren’t just renting, but buying, too.

U.S. buyers have been responsible for 14% of mortgage deals being secured by foreign buyers across the U.K.’s prime housing market in the year to mid-October, according to a report released earlier this month by high-net-worth mortgage broker Enness Global.

They were the second most prominent group of international buyers, behind those from the U.A.E., the report found.

Eventual lifting of international travel restrictions is expected to further boost their numbers.

Visitors to the U.K. from the U.S are currently required to quarantine for two weeks, a measure that is holding the market back and putting off potential buyers from viewing properties in the U.K. in person.

“A lot of people want to invest,” Mr. Bradshaw said. But “if you’re coming in [to view properties], you have to do a two-week quarantine. They don’t want to be here for two weeks. That’s the biggest frustration.”

In Battersea, a neighborhood on the banks of the River Thames in south London, home to the new Nine Elms development and the new U.S. embassy, there has been “a significant increase in the number of U.S. buyers looking to buy family homes or large apartments,” according to Keir Waddell, head of Knight Frank’s Battersea and Riverside office.

“We have seen far more people who were based in the city—and potentially living more centrally—coming to look at Battersea. A noticeable amount of U.S. buyers,” Mr. Waddell said.

The move further afield echoes the larger trend of city residents moving out to the country during the pandemic. Battersea “is their version of moving out to the country,” he said. “It has a bit more of a family feel.”

Though the coronavirus pandemic may have prompted a new segment of Americans to transform into Londoners, their presence in the city was notable before now.

“In 2007, we had zero clients from the U.S.,” said Camilla Dell, managing partner and founder of London-based buying agency Black Brick. “Then, over the last two or three years, more U.S. clients than ever before.”

Their arrival is driven by a number of factors.

“One is [President] Trump. A number are not Trump fans, it would be fair to say,” Ms. Dell said.

Another is the favorable currency exchange rate, and for “U.S. citizens living in California, with wildfires and climate change, climate plays a factor too,” she said.

However, “I can’t say that we’ve been flooded [with buyers] from the U.S. from the pandemic,” Ms. Dell added, citing the difficulties posed by the two-week quarantine.

Whether relocating due to the pandemic, political or work reasons, U.S. movers have a fondness for London’s high-end neighborhoods.

For those relocating permanently, Notting Hill is popular, and, for the U.S. buyer looking for a pied a terre, Mayfair is the place of choice, according to Ms. Dell.

St Johns Wood, home to The American School in London, is also a popular destination. Around Halloween, due to the high-density of U.S. residents who live there, it’s the most impressively decorated spot in the city, Ms. Dell said.

When it comes to amenities, three things are top of their lists: home offices, a roof terrace or garden, and parking, according to Mr. Bradshaw.

“The office space and outdoor space has been absolutely critical since the pandemic,” Mr. Bradshaw said. “The key aspect is can they work from home? And if you can’t get one or two working from home in private, it’s not going to work.”

Major cities may still want to look to international buyers

By Virginia .K. Smith

Tumultuous financial markets and eager sellers draw investors to global real estate hubs even as local residents head for the outskirts

Between international travel restrictions and the boom in demand for single-family and vacation homes, much of the real estate industry’s recent focus has been set squarely on domestic buyers who have suddenly found themselves in need of more space.

But in certain urban markets with high levels of luxury supply—think New York, Miami, Los Angeles, and London—the current environment also presents an opportunity to court buyers from abroad. This is particularly true of buyers from countries that have already passed the worst of the coronavirus crisis.

“I’ve personally sold three homes, sight unseen, to Chinese investors during the pandemic,” said Mauricio Umansky, founder of The Agency in Los Angeles. “There’s certainly a perception among international buyers that now is a good time to buy U.S. real estate because it’s ‘on sale.’ Any time there’s a drop in the market, you see outside investors wanting to put money into the U.S., because it’s still the strongest market.”

Potential price cuts aside, the appeal of a safe investment outside of the volatile financial market can also prove a powerful incentive for buyers looking to diversify their international portfolios.

“We started following markets that were emerging from the virus as we were going into it—South Korea, Mainland China, Portugal—that all had strong markets in early April,” said Nikki Field, a senior global real estate adviser with Sotheby’s International Realty in New York. “We focused on our wealth adviser contacts there to let them know there was opportunity in New York.”

And while many local buyers in New York City have been headed for privacy and acreage outside of the city, for international investors focused on eventual resale value, the condo market is still king.

Investors “want prime luxury condo new developments, because that’s the biggest opportunity for long term return,” Ms. Field said.

All of which means that sellers hoping to offload luxury condos may want to turn their attention outside U.S. borders—and that for would-be investors, now might be the time to get a foothold in major cities while other buyers are distracted by the suburbs.

Buyers Are Seeking Out Signs of Distress

Though the market may not be at its low point, some investors are nonetheless treating the current moment as an opportunity to invest in high-end properties at a relative bargain.

“In Miami, we’ve seen an uptick not only from markets like Chicago and New York, but also from Europe and South America,” said Rishi Kapoor, CEO of Location Ventures, a developer based in South Florida. “Towards the middle of May, we started to see interest from some of our feeder markets in Columbia, Mexico and Venezuela, who aren’t comfortable with how their local governments have handled [the pandemic], who have always been interested in Miami and now realized they can make it work as a home base.”

The sense that there are deals to be found as U.S. markets struggle is also a significant driver of interest from abroad.

“In new development, what you’re really attracting from abroad is investment opportunities,” said Vickey Barron, a New York City-based Compass agent. “They’re looking at New York thinking, ‘why not come in now, pick up some great assets at a good value, and the market will bounce back.’”

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For London properties in particular, the current exchange rate adds another layer of appeal for foreign buyers.

“For investors, there’s a huge advantage to [buying] the dip,” said Camilla Dell, founder and Managing Partners of Black Brick Property Solutions in London. “Central London was already down 20% from its peak [in 2014], and the pound is weak, effectively giving dollar-based buyers a 45% discount.”

“The clients I’m speaking to from overseas are looking for signs of distress, and where they can, buy cheaply,” Ms. Dell said.

Though the currency difference is less dramatic in the U.S., some investors are making a similar calculus for purchases stateside. “We’ve had such a strong dollar for so long that when there’s any little hole in the marketplace, where foreign buyers sense they can catch up, they’re jumping in,” said Dora Puig, director of sales at Palazzo Della Luna, a development on Fisher Island in Miami.

More: Buyers Eyeing South Florida Should Consider Broward County for Good Returns on Investment

Developers Tailor Deals to Investors’ Bottom Lines

Buyers shopping cities for deals might not find especially large price chops, but they are likely to be able negotiate more favorable terms on payment plans, monthly maintenance, and other assorted extras that are geared towards investors who are keenly focused on overall cost and thus willing to negotiate for concessions outside of the asking price.

“Everybody is asking for the ‘COVID discount,” said Gil Dezer, president of South Florida-based Dezer Development. “We’re not lowering prices, but we’re doing value adds—we might pay maintenance, we might do a flooring package for somebody. We don’t want to affect the values of the buyers who have already purchased, so those little add-ins can usually make the deal.”

Essentially, any offer that shifts expenses from the buyer to the seller is fair game.

“I’ve seen developers sell apartments furnished, or give big credits at closing for interior design because they want to [get the deal done],” added Ms. Puig.

More: Los Angeles’s Historic Homes: A Tried-and-True Investment Even in a Time of Uncertainty

In New York City’s market, where luxury prices had already deflated over the past few years, discounts aren’t growing much beyond a few percentage points, Ms. Barron said. “We already did our work adjusting prices prior to the lockdown, but you could make an argument [as a buyer] that you don’t want to pay maintenance for services you can’t use right now, so the building should pick those up for the next 12 or 24 months.”

“The more courtesies the developer offers, the higher the transfer price,” Ms. Field said. “So it’s not just 35% off the asking price, it’s 35% off the complete cost. [Covering] the mansion tax, finishing closets, doing painting or modest renovations, crediting back many months of common charges, all at the developers’ cost. Those aren’t recorded, but the transfer price is obviously higher, and the credits are deeply attractive to buyers.”

In new developments, deposit size has also become a common point of negotiations. “Many developers have reduced the levels of deposits needed to purchase a property here,” said Edgardo Defortuna, president and CEO of the Fortune International Group, a Florida-based developer. “They used to request 50% deposits throughout construction, and in many cases it’s now 30% or 35%.”

More: Amid the Covid-19 Crisis, Single-Family Homes May Be the Smart Investment

Due dates for deposits have also become more flexible to allow time for buyers who may have difficulty traveling under current restrictions to see a property in person before taking the plunge, Mr. Defortuna said.

However, for investors specifically in search of deals, the time frame for finding major discounts could be deceptively brief, as urban markets begin to regain momentum and competition from other foreign buyers increases.

“International buyers that are coming late into the fold are not being afforded as eager, immediate deals as they were just a month ago,” Ms. Field said. “The window of opportunity is short.”

Is Now the Time To Invest in a Prime London Home?

With experts pointing towards a market about to bottom out, those prepared to hold onto their investments could benefit

By Liz Lucking

London’s luxury market, long home to aristocrats, wealthy Middle Easterners and Russian oligarchs, has been more aptly known lately as the home of plummeting real estate prices.

A series of tax bumps on top-tier properties, penalties for second-home buyers and Brexit-related uncertainty, have made the city’s real estate outlook gloomy since 2014.

But now, as prices appear to have mostly plateaued, according to experts, central London’s prime market looks poised to bottom out, appealing to buyers once more. And as long as they’re prepared to play the long game and hold on to their investments, a stake in London luxury can again be a good bet, experts say.

“For the central London market, it seems we’ve seen the falls we’re going to,” said Marcus Dixon, head of research at LonRes, a real estate data firm. “The feeling that I get is that we’re bumping along the bottom.”

The central London market “is always going to be where people want to invest, but people have to look at it as a much longer investment,” Mr. Dixon said. “People aren’t going to cover their costs in three years anymore.”

Prices for prime real estate in central London are down 16.7% compared to September 2014, according to April’s first quarter report from U.K. real estate firm Savills. The rest of the U.K.’s prime market has performed far better in the same time frame: Prime properties in the urban areas of the wider South of England rose in value 10%; prime properties in the urban areas of the Midlands and North of England saw increases of 8.9%; and prices of prime urban Scottish properties rose 10.2%, according to Savills.

More recently, first quarter 2018 prices for prime central London properties were down 1.1% compared to the previous quarter, the report said. Quarterly declines have been hovering around the -1% mark since early 2017, after seeing larger falls in the latter half of 2016, when the third and fourth quarters logged price declines of 2.64% and 2.09% respectively.

The recent easing of quarterly declines is a sign prices are approaching the bottom of the trough, according to Lawrence Bowles, associate director of residential research at Savills.

But while price growth is not likely on the immediate horizon, Mr. Bowles said, Savills is expecting the property market to begin recovering in 2019, with the real bounce back coming in 2020.

Savills predicts house prices will rise 8% in central London during 2020; another 5.5% in 2021; and another 3.5% in 2022. Over the next five years, the real estate company is anticipating compound growth of 20.3%, further underlining that those buying will need to think long term about any real financial gains.

This isn’t unusual for London, a city that is used to seeing large peaks and troughs. Between the first quarter of 2008 and the first quarter of 2009—in the midst of the financial crisis—values in prime central London fell more than 20%. In the five years between the first quarter of 2009 and the same period in 2014, prices rose almost 80%, according to Savills data.

This time around though, such a rapid bounce back seems unlikely, according to Mr. Dixon, who predicts a slower return to growth, “which isn’t a bad thing,” he said. “You want a sustainable market.”

But that doesn’t rule out more drops being on the horizon, either.

“I would be cautious in saying we’ve reached the bottom,” said Camilla Dell, managing partner and founder of Black Brick Property Solutions, a London-based property consultant. “Do I see it dropping another 20%? No, but I could see another 1%, 2% or 5%.”

What went wrong

London’s shaky market can be blamed on a number of factors, beginning in 2014 when the government made changes to stamp duty, the U.K.’s tax on homebuyers. Though the 2014 changes reduced stamp duty for many, it was raised for those buying houses worth more than roughly £1 million (US$1.35 million), and the London market—laden with pricey homes—slowed as it became more expensive to buy.

Then in the last couple of years, an additional 3% surcharge on stamp duty was added to purchases of second, or additional, homes. And a recently passed tax incentive for first-time buyers only applies to properties priced at £500,000 (US$675,250) or below.

The upcoming removal of the U.K. from the European Union—the result of 2016’s referendum—only compounded the problem. The uncertainty brought a level of hesitancy to the housing market that is still to be resolved.

The Right Time to Buy?

“The fact that prices have dropped and don’t appear to be dropping much more will encourage more investors,” Mr. Dixon said.

And now, with an increasing number of sellers more realistic about what their homes are worth, there are some real opportunities in central London, he added.

More than half of London’s prime properties are changing hands for below the asking price, according to April’s prime property index from private bank and wealth manager Coutts. Buyers can now expect to have an average of 12.1% chopped from the asking price of the top-tier properties they’re purchasing.

For those willing to hold onto their investments, “you could argue that it might not get better than this and if you wait on the sidelines you might miss the opportunity,” Ms. Dell said.

“All of the forecasts over the next five years are positive,” Ms. Dell said. “We’re in the window where people buying now will get a good deal.”

Timing is also looking good for dollar-based investors, who can take advantage of both London’s lower prices and the dollar’s currently high value against the pound, according to Ms. Dell. Back in June 2014, $1 was equivalent to around £0.58, today $1 nets roughly £0.74.

A Safe Bet

London still has plenty of draws beyond its property price growth. Its strong educational system and top-notch universities, as well as its relative political stability, continue to be drivers of interest and purchases by international buyers.

But needs-driven buyers—those looking for primary homes rather than vacation homes—are really fueling the market now, according to Tom Bill, residential research associate at property consultancy Knight Frank.

“Pent-up demand has formed over the last couple of years, and there comes a point that people have to move,” Mr. Bill said. “So there’s an element of that that’s driving the market and helping prices rebase.”

“London is still an attractive place to be, Brexit doesn’t appear to be materially changing that,” he added.

A Full Recovery?

Though statistics and experts point to the market bottoming out, that’s not to say the market has fully recovered.

“It’s too soon to call it a recovery,” Ms. Dell said, adding that the market is still quite fragile.

And with Britain’s official departure date from E.U. scheduled for March 29, 2019, “it’s unlikely we’re going to see any significant growth before Brexit negotiations become clear,” Mr. Dixon said. “That’s what’s holding back the market most.”