Property investment

London's star shines bright

Global economic woes and British stamp duty changes fail to dampen demand from Asian buyers, writes Peta Tomlinson

PUBLISHED : Wednesday, 28 November, 2012, 12:00am
UPDATED : Wednesday, 28 November, 2012, 3:13am

Measures intended to cool the British luxury market have failed to curb Asian appetites for prime London property. Flats upwards of £1 million (HK$12.4 million) almost walked out the door at a release this month in Central, far exceeding the developer's expectations. One penthouse sold for £7.5 million, a new high for Fitzroy Place in Fitzrovia.

Daniel Van Gelder, co-founder of developer Exemplar Properties, says he was overwhelmed by the response in Hong Kong, which netted £25 million of sales in one weekend. "[Market intelligence] told us we would never sell flats over £2 million here. We were delighted that despite recent changes to the stamp duty and land tax regime, we were able to sell so many flats above that price and even a penthouse."

In May, at the initial launch of Fitzroy Place in Hong Kong, Singapore and Malaysia, deals were signed on 120 flats, including 45 to British buyers who travelled to Asia for the launch. The scheme is well ahead in terms of sales projections, while two-thirds of buyers are owner-occupiers. Among them are Hong Kong buyers who, some say, are buying now to secure a London base when their children are at university.

It's an oft-repeated story. Global economic uncertainty is fuelling demand for luxury bricks and mortar, and safe havens appeal to cashed-up Asians.

Not all prime markets are benefiting from the global economic uncertainty. In Paris, usually a perennial favourite for overseas investors, buyers are adopting a wait-and-see attitude, according to Knight Frank.

London, in contrast, was one of five cities globally to record double-digit growth in the third quarter. Knight Frank cites the British capital as one of the cities increasingly considered investment hubs for high-net-worth individuals. Another price rise of 0.8 per cent in October took the annual growth rate to 10.1 per cent and, as Knight Frank notes, prices are now 52 per cent higher than in March 2009.

Knight Frank's Liam Bailey, head of residential research, says a "search for safety" is boosting prime London prices. "The euro-zone crisis has continued to boost demand for prime central London property among international buyers, many of whom are driven by the search for a safe haven for their assets."

When Exemplar released the first phase of Fitzroy Place, Hong Kong was selected for the global launch, followed by Singapore. Deals were closed on 65 per cent of a scheme that was supposed to take two years to sell.

Knight Frank had predicted that stamp duty increases of 7 to 15 per cent for homes worth more than £2 million, announced in the British budget in March, might be enough to convince buyers to hold off. Yet, at the launch of the second and final phase of Fitzroy Place in Southeast Asia this month, another 40 units worth £80 million were sold, taking the total since May to 170 units realising a total of £271 million.

Another developer, Taylor Wimpey, debuted a prime London property, Argyll Place, in Hong Kong in September. The project has 20 luxury town and mews houses.

"Argyll Place was very well received by Hong Kong buyers and we achieved everything we had set out to. The press conference and exhibition were both a great success and we have had strong follow-up interest," says Taylor Wimpey's central London managing director Ingrid Skinner.

Skinner says Hong Kong and wider Asian purchasers are generally well informed when purchasing British property, so will have already taken into account the taxes incurred. "The prime London market is deemed a safe hub and good investment opportunity. Demand for property here is high as it offers investors good rental returns and excellent capital growth."

Ashley Osborne, Colliers International executive director of international properties for Asia-Pacific, agrees that the enthusiasm of Hong Kong buyers for prime London property continues to grow.

"In a survey of our buyers, conducted in the first week of November, the sentiment towards the economy and the property market increased again. We found that 27 per cent of respondents are looking to purchase their next London property with cash, up from 14 per cent in October. We see this as a sign that Hong Kong buyers are becoming more confident about the London market."

Osborne says the favourable currency exchange rate is one driver. "The Hong Kong dollar is approximately 30 per cent stronger now [against the pound] than it was back in the boom of 2007," he says. "A lot of our buyers are repeat London purchasers, partly because of the strong rental demand and previous positive experiences. We're finding that rental properties are being snapped up very quickly by tenants, and at a good rental price. This strong rental market is helping to support demand in Asia."

Another factor is the Crossrail, due to open in 2017, which is bringing buyers back to London. A report released last month by Crossrail forecast that prices will go up 25 per cent within one kilometre of stations.

Colliers International last month launched a central London development, Goodman's Fields, in Hong Kong. Strong demand was received from Hong Kong buyers for the Aldgate property, just a short walk from the city. Demand was also strong at the Shanghai and Singapore launches. "London developers know that Hong Kong buyers are very educated about the market and are looking for good-quality developments in central locations," Osborne says. "I continue to read that local buyers in London are starting to become more active. This increase in demand from the local market may mean that some developments will sell out in London."


Buying Guide

What you can buy for £285,000

A one-bedroom flat in Sandy Lane, Teddington, located along the River Thames. Close to London's epicentre, the flat is sized at 457 sq ft.

What you can buy for £12.75m

A penthouse in Fitzroy Place, Fitzrovia. The Block 8 penthouse has an internal area of 3,566 sq ft and an external area of 756 sq ft. Accommodation comprises a dual-aspect reception with terrace access, three bedrooms with en suite bathrooms and a music/day room.