Long before Britannia became cool, Hong Kong buyers were keen to invest in property in London. Over the past year, that interest has become more intense, as rising prices have made the investment returns look better than they have been for years. Many developments showcased in Hong Kong in recent months have sold out, and this weekend's exhibition of The Belvedere development looks like being no exception. 'We've had a fantastic response,' said Linda Robinson, executive director of international properties at Colliers Jardine in Hong Kong, which is hosting the exhibition. 'We sold 12 units ahead of the exhibition.' The 58 units on offer in The Belvedere, near the St John's Wood district, are priced between GBP195,000 (about HK$2.49 million) for a one-bed apartment and GBP340,000 for a three-bedroom unit. The luxury development includes parking, gym facilities, a 24-hour concierge and electronic security systems. The popularity of London properties has been spurred partly by the slump in the Hong Kong market, experts say. As property prices have sunk in the SAR, many of its investors have been looking to international markets for better returns. Britain has long been one of the most popular overseas markets, although the attention has been almost exclusively on London. Tina Ting, manager in charge of the Hong Kong representative office of the UK property department of FPD Savills, said historical links to Britain made it a familiar location for many people. 'People just know it - they send their children to school there,' she said. London's position as a top financial centre helped ensure its future prosperity and gave Hong Kong investors some security in their investment, she said. A low tax regime for overseas buyers has also made London attractive. Barry Lea, regional marketing director for Lloyds TSB, said: 'It's one of the friendliest [tax] regimes for non-residents regarding property.' Mr Lea said there was a variety of tax-deductible items to help mitigate liability for tax on rental income, while personal tax allowances could help minimise - or even avoid - capital gains tax. As long as the owner remained domiciled outside Britain, it was also relatively easy to avoid inheritance tax by using offshore-trust structures. The surge in interest has also been fuelled by a revival in the British property market, following the slump of the early 1990s. In the past year, prices have risen by as much as 20 per cent in some areas. 'London has always had a hot billing,' said Ms Robinson. 'But with prices going up, people want to get in before they go up any more.' Potential investors need to be aware that the sharpest increases have been restricted to certain select districts. In many districts prices have remained stable - or even fell - over the past year. London Residential Research compared prices for newly developed two-bedroom flats between the second quarter of last year and the second quarter of this year and found that in Pimlico, Knightsbridge and Hampstead there had been little, if any, increase in price. In Islington, prices had actually fallen by 4.2 per cent. London properties have proved to be good for their rental yields. Louis Li, director of Rubicon Properties, said low interest rates and steady price rises had meant investments in London property had given a better return than investments in Canada, Australia or the United States. Estimates suggest that London properties have achieved 7-8 per cent gross rental yields on average over the past 20 years. In the past 12 to 18 months, the gross yields have risen to closer to 10 per cent. Net yields, after deducting expenses such as service charges, repair costs, insurance and letting agents' fees, are generally closer to 7-8 per cent. However, Mr Li warned that investors should be cautious. The letting market had become very competitive and rents were not increasing in many areas of the city. When leases came up for renewal, rents often were steady. An oversupply of new properties in the Docklands was making that area a potential problem to let, agents said. Hong Kong buyers were also concerned that the sharp rise in property prices could be an indication that the market is due for a correction, but Mr Lea said he did not see prices being particularly overheated. Most in the industry agree market conditions are very different now from the late 1980s, when a crash in prices left many home owners with negative equity and forced banks to repossess properties. 'The affordability index has not gone through the stratosphere as it did in the 80s,' Mr Lea said. The affordability index uses average household income and ability to finance a home purchase to calculate a population's ability to invest in property. All the signs are that British residents are still active in the property market. Property experts also point out that the high interest rates of the 80s and high inflation contributed to the problem. 'This time the economy is healthy and interest rates are low,' Ms Ting said. Inflation is also lower than in the 1980s, but for those who are still unconvinced, some properties offer a guaranteed yield. The Belvedere has a 10 per cent gross yield guaranteed. 'At the moment, yields are very good,' said Ms Robinson. 'Probably the best you're going to get.'