photo for illustration only
On 2014 - A year of potential fireworks
Focus On London
2014 may well turn out to be an interesting year, in the face of slowing economic growth and political and financial upheaval in some emerging economies.
As emerging markets begin to unravel with the tapering of US quantitative easing (QE), the UK is finding itself increasingly favoured not only as a property hotspot for foreigners to anchor their wealth but now as a safe haven for the super rich migrants from these financially tottering and politically unstable economies to stash away their money in the form of property assets.
A Civitas’ report mentioned that, "only 27 per cent" of newly built homes in central London went to British buyers last year; the rest went to foreigners, with "more than half sold to buyers from Singapore, Hong Kong, China, Malaysia and Russia".
Britain's political stability, benign property taxes and a stabling economy make London or rather inner London as the darling of the world. London home prices lead and inflate faster than in any other UK cities.
Investors see UK’s continued growth potential, inadequate supply and competing demand for housing as a good bet their investments will pay off better in the long run, particularly in London than in any other part of the world.
Clearly, the British property market has attributes that is undeniably attractive to foreigners. The UK has no restrictions on property ownership and a long history of respecting property rights. You can literally buy today and sell a year later and walk away freely with all your gains intact.
Its premium housing market has generated an average capital return of about 25 per cent annually for a decade or approximately 250% over 10 years. With no capital restrictions and high capital gains annually, the benefits of investing in British real estate become overwhelmingly apparent.
London’s home prices have risen sharply of late, with a rush of foreign buyers for London mansions. The Euro zone debt crisis and the Arab spring have driven these prices up.
London home prices in the last quarter of 2013 were 14.9 percent higher than 2012 with some top-end values inflating even more.
With London’s home prices increasingly becoming out of reach for locals, is it any wonder that some quarters are calling for a ban on foreign buyers.
To forestall a property bubble from forming, the Chancellor of Exchequer, George Osborne said in December, a capital gains tax on foreign property investors from 2015 may be imposed.
With some economies unravelling of late, UK has found new investors from Brazil, Argentina, Ukraine and Turkey, making their way into prime central London property market. Amidst high interest rates, unsettling economic conditions and a falling currency in their countries, these investors see London as a good bet where their money would be secure and safe.
As capital take flight and currencies fall in value, Knight Frank witnessed a spike in online enquiries of UK homes. Over a 12 month period, the online figures registered from economically fragile Brazil were up 115 per cent, currency-crisis-hit Argentina up 67 per cent, political-unrest Ukraine up 67 per cent, capital-flight and falling-currency Indonesia and Turkey up 10 per cent, while South Africa up 9 per cent and India up 3 per cent. Some of these eventually translated into actual sales.
When all is said and done, money fleeing economic and political instability will always find in London and the upper echeleon of its property market, a well established harbour.
However the issue of foreign property purchases in London has taken on a political overture with media reports saying expensive houses and apartments are often bought only as investments and are left unoccupied.
Quote: "it is a scandal that overseas visitors are buying London homes as piggybanks with no intention of living in them” Labour housing spokesman Emma Reynolds said.
by Zen Tan