Staying power

PUBLISHED : Wednesday, 12 March, 2008, 12:00am
UPDATED : Wednesday, 12 March, 2008, 12:00am

Central London remains popular with foreign investors

Most experts agree that the prime areas, generally described as central London, still offer good opportunities to investors.

Liam Bailey, head of residential research at Knight Frank, said the British residential sector remained attractive to foreign investors and was likely to remain so for the foreseeable future, thanks in part to a transparent legal system, a tax-friendly regime and opportunities for long-term capital growth. 'Foreign investors are likely to continue to favour London as a base for their investments,' he said, adding, 'High-net-worth individuals demand prestigious residences in prime areas.'

Nevertheless, a recent report by Knight Frank suggests there has been a shift towards these individuals buying outside London - university cities are particularly attractive to Asian investors looking to buy property for their children studying in Britain, while Russian and European buyers are increasingly purchasing property in the best areas of Southeast England, according to the report.

Marc von Grundherr, director of Benham and Reeves Lettings, said while it might take slightly longer to sell a property now, there were still buyers for properties that were not overvalued. 'Just recently, a client of ours bid at an auction for an unmodernised small studio flat near Hyde Park. It was said to sell for GBP280,000 [HK$4.35 million] to GBP300,000 because it needed complete refurbishment. It sold for GBP380,000 - a good example of what lengths people will go to, to own a slice of prime London,' he said.

Historically, a downturn in sales activities usually fuels a buoyant rental market, and Mr von Grundherr said the current climate could prove a very good opportunity for shrewd investors. 'With December and February's cuts in interest rates, confidence should be underpinned. I believe that those who buy in 2008 will emerge as the property gurus of the next boom, but investors need to remain cautious and get good advice from an agent who specialises in lettings.'

He said with the current instability, investors would be wise to go for the best and most prime area - or central London - because property there had consistently outperformed conventional assets for the past 15 years. He advised against 'talked-up, up-and-coming or developing areas', and said that before buying, investors should always check with a letting-only agent on the rental and letability of a property.

Knight Frank, however, said a lack of understanding and perceived complexities of the British transaction process meant many international buyers favoured new buildings. 'Ease of maintenance and management, together with opportunities to purchase off-plan, are key factors that are likely to continue to see foreign purchasers opting for a new-build property,' Mr Bailey said.