Hong Kong owners reap British rental rewards

If Britain has entered an age of austerity, London's landlords may want more of it, since rents in the capital are at record highs. And among the beneficiaries of those rents are Hong Kong investors, who have bought heavily in Canary Wharf in particular, where rents are rising strongly.

Research from estate agency Savills shows rents in London's prime residential districts rose 10 per cent over the past 12 months, and now stand 4 per cent above their 2007 peak. Most growth has been in prime areas bordering central London. In Regents Park and St John's Wood rents are 20 per cent higher than four years ago.

Across the board in all prime areas, rents for flats are now 4.9 per cent above 2007 peak levels, compared to 2.1 per cent for houses, reports Savills. Average yields for 'des res' homes are flatlining at 3.8 per cent gross, as capital growth has kept pace with rent rises.

The agency forecasts rents will rise 8 per cent this year.

Hong Kong landlords benefited from rising rents. They bought one in 11 new homes sold in prime London areas over the past four years, Savills said.

'With rents rising over the past 12 months and forecast to continue to grow, investors stand to see healthy yields in the future, as well as benefiting from positive cash flow, with mortgages currently being offered to foreign investors with low interest rates,' said James Thomas, international sales director at Savills.

According to Savills, one third of Hong Kong and Chinese investors in prime London areas bought in Canary Wharf between 2007 and this year, where rents rose 11.6 per cent over the past year, rebounding from a sharp downturn during the recession. The agency combines Hong Kong and Chinese buyers, because some mainlanders buy London property at sales exhibitions in the city. Kensington, Wapping, Chelsea, Battersea, and Clapham are other areas targeted.