Time to buy at the double
The number of second home buyers in London has surged 10-fold, an analyst says.
According to Richard Donnell of Savills, these new second home buyers are those who have moved from stock market investments to property.
Luxury residential prices rose 7 per cent in Central London during the first eight months of this year. Central London includes the districts of Knightsbridge, Kensington, Chelsea, Mayfair, Westminster, Belgravia, Hampstead, St John's Wood and the City of London.
Mr Donnell said two-thirds of prime Central London second home buyers purchased principally for investment in the 12 months to July this year. The remaining one-third were those looking to buy a home as their main residence.
The proportion of investors doubled over this 1995/96 period compared with the 12 months to July 1995.
There were two main groups of investors - second home buyers and landlords/ developers.
The investors' share of the market was boosted by a rise in the number of second home buyers over this period, from 3 per cent to 30 per cent.
Among other investors were landlords who bought rental properties and developers who purchased redevelopment and refurbishment sites.
The proportion of these buyers in the market edged up from 24 per cent in 1994/95 to 27 per cent in 1995/96.
'This year has seen the return of speculative buying in the Central London residential market after an absence of eight years,' Mr Donnell said.
However, the speculators were not the same as those who entered the market during the 1980s. The 1980s speculator often resold a property within weeks but the new breed was looking to hold its asset for at least two to three years, he said.
Mr Donnell said there was a significant increase in the proportion of property professionals investing in the market. Two-thirds of buyers were from the property industry in 1995/96 compared to half in 1994/95. The second biggest group of investors came from the financial services sector.
Rising prices in Central London have ensured the borough of Kensington and Chelsea is the capital's most expensive district in which to live. Land Registry data shows that the average price of flats and houses there is GBP227,980 (about HK$2.7 million).
High yields were also attracting investors to the market, Mr Donnell said.
Net yields had reached 12.2 per cent for some properties, because of rising rents and capital values, he said.
Rents rose nine per cent in the year from June 1995, according to Savills Prime Central Rental Indices. The biggest rental growth had been in Kensington - 7 per cent in the second quarter of 1996.