The London property market remains very much two tiered. Firstly the traditional London houses and flats homes for domestic and European buyers, and secondly the new build modern flats being developed across prime London and beyond popular with Asian and Chinese investors. These new developments are a credit to the London cityscape and are finished to an exacting standard designed to appeal to the Asian buyer.
Rarely do Chinese or Asian buyers seek to buy traditional period London property, preferring to invest in contemporary developments in central London, that offer an asset with which they are familiar. Understanding the dynamics and the workings of the London property market is important for any buyer, but particularly advisable when acquiring property as an overseas investor.
Safe Haven
London’s appeal is that it offers a safe haven, is politically stable and culturally diverse, embracing overseas owners and investors. Historically, the best property returns have not been made in the new-build sector, but in resale of traditional second-hand property. Investors should bear in mind that currently prices being sought for new build units are quite high. It begs the question whether this has been caused by Asian/Chinese investors pushing prices up, or whether it reflects the global market.
If the former, investors should be aware that when it comes to resale the ‘normal’ buyer looking to buy into a new-build is seeking an unlived in and ‘first-hand’ property. New builds command a premium which may not necessarily be sustainable in the resale market when new projects are regularly being brought to market for broadly the same price.
Buy-to-let
If a property being purchased is solely as buy-to-let and not to be used by as a London base, then the traditional London home deserves to be considered for any property portfolio. The resale market and pricing is well understood by UK and European property markets; in contrast the new build development sector has yet to trade effectively and in any volume in the resale market. Our advice to Asian/Chinese buyers is to talk and gain advice from local agents in London. They will be able to access data and offer comparable property examples, that you will not see on a new build road-show in Asia.
In the government’s Autumn 2015 Spending Review a 3% tax on buy-to-let homes and second home purchases was announced, coming into effect in the UK from April 2016.
Charles Curran is Principal at Maskells in London
Maskells employs a team member fluent in Mandarin and Cantonese who is able to advise and communicate with Chinese investors coming to London with the intention of investing in property