Is Foreign Investment in London Property Set to Rise?

One perhaps unforeseen consequence of the Referendum result is that foreign investment in London’s property market is set to increase.

Estate agents have noted a rise in the enquiries from Chinese, Middle Eastern and even some European buyers after the pound’s value took a nosedive in the markets. This made the foreign exchange rate favourable for overseas buyers looking to take advantage of the fluctuation.

Sterling is likely to increase in value as the terms of Brexit are made clear and other issues, such as the new Prime Minister, are resolved. Foreign investors are thus seeing this uncertain post-Brexit period as an opportunity window before the pound clambers back up in value.

Overseas Buyers

With UK investors showing signs of caution following the Referendum, overseas buyers from all over the world, especially those outside the EU zone, are looking to take swift advantage of the situation.

The sterling is at an all time low after the Referendum, making London properties more desireable to foreign investors.

Image credit: Karen Bryan via Flickr

David Adams, the managing director of luxury estate agents John Taylor said that:

“I was inundated with more calls from the Middle East on Friday (the day of the Referendum announcement) than any other day of my career.”

Likewise, the founder and chief executive of eMoov, Russell Quirk, has noted a sharp rise in the number of buyers from China and Singapore compared to a weekend earlier.

Price Effects

Another reputable estate agent, Stirling Ackroyd, has estimated the financial effects on London’s property market overall. In terms of EU investment, buyers could gain a €51,000 (£42,000) discount on their purchase.

Other forecasts show that the average price of a house in the capital equates to just €579,000 – compared to a record high of €630,000 in November 2015. European speculators, perhaps concerned about the future of the euro themselves, may be looking to the UK as the most lucrative investment area.

Savings will be made through various currencies too. For example, Douglas & Gordon indicates that property values in the capital’s emerging prime areas could be around 20% less expensive in US dollar terms.

The vote has also reverberated across Asia, where Chinese, Singaporean and Hong Kong investors especially will be constantly monitoring the market for promising buying opportunities.

Some Foreign Caution

The situation isn’t as simple as international investors buying every property in sight due to favourable currency variations. In fact, a prominent bank in south-east Asia, the United Overseas Bank, advised customers to be cautious when considering the UK market.

Will London always be a draw for foreign investors?

Image credit: Moyan Brenn via Flickr

Guy Watson, the managing director of Champions, an estate agency based in Knightsbridge has been quoted:

“A lot of investors from Hong Kong and Malaysia just want out, so much that they will accept around 15 per cent less what they paid for it two years ago.”

However, overseas concern regarding the London property market post-Brexit has been rare. Britain will always be a draw for foreign investors, as PrinvestUK’s managing director Aaron Campbell explains, because it offers “good returns in a structurally undersupply market [sic]” and the standard of living is very high.

Future Effects

The general consensus is that, despite this period of uncertainty, house price growth across the UK’s major towns and cities will continue upwards after the Brexit storm has passed. Prices usually follow the law of supply and demand – and there is a lot of demand in Britain – rather than sheer speculation.

Despite plans for foreign investment to be slowed down by new London Mayor Sadiq Khan, principally by advertising homes in the UK before doing so abroad, the Leave vote is likely to have the opposite effect as investors seek to take advantage of the pound’s temporary fall in value.

For more information on Brexit’s effect on the UK housing market, check out Brexit News on Property Investment.

A Guide to Investing in Student Property in London

Investment opportunities abound in the 21st century, and the list of options that investors have available to them seems to grow by the day. Investing in student property is nothing new, but it’s attractiveness is increasing.

This is thanks largely to its stability in what many consider an uncertain world. Stock market volatility, shrinking interest rates and lack of confidence in the banking sector have all led to investors looking to put their money elsewhere, especially the defensive part of their overall portfolios.

While there are dozens of cities in the UK that are worthy of your attention if you are looking to invest in student property, London stands out for obvious reasons. As England’s capital, London is a global hub and its reputation across the world as a city of culture, business, entertainment, and education is second to none.

These factors, amongst others, make studying in London the number one choice for many students, both domestic and international. But does this popularity make investing in the capital a good idea? Our guide to investing in student property in London aims to find out.

An overview of the capital

Despite being situated on a relatively small island in the global scheme of things, London is a big city with lots of character and a whole lot going for it. Around 2,000 years of history awaits visitors and the list of things to see and do here are too plentiful to mention. There are not many cities around the world that can boast four World Heritage Sites, and they form merely the tip of London’s cultural iceberg.

London is bursting with heritage and culture

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London is, however, far more than just a tourist attraction. It’s an ideas factory, too. The English capital is home to one of the world’s largest financial districts; is a leading light in the world of fashion, art, literature and music; it’s at the forefront of the new media revolution, and is pushing the boundaries of modern architecture whilst maintaining a more traditional feel in many of its boroughs.

Overall, London is the place to be right now, and students from around the world are queuing up to be part of its hustle and bustle.

London’s economy

London is responsible for around a fifth of the UK’s GDP, and the money comes in from many directions. As we have already touched upon, London is home to one of the most prominent financial districts in the world. The City of London is synonymous with business and finance, and Canary Wharf is now another established force in this sector, too.

The tech industry is also flourishing here, with areas such as Old Street (commonly referred to as Silicon Roundabout) leading the way. The American business magazine, Forbes, rated London as the most influential city in the world back in 2014 and the amount of companies willing to call London home continues to grow, despite it having the most expensive office market in the world.

Tourism is another major player in London’s economy. It’s the most visited city in the world – attractions here had 65 million visits in 2015 alone – and the tourist industry accounts for well over 350,000 full-time jobs in the capital. Over half of all visitors to the United Kingdom spend time in London, and the travel website TripAdvisor named the city as its number one destination in 2016.

Regeneration and investment

London is a fluid city, constantly changing and evolving to meet the needs of the people who inhabit it. The most recent major change to the capital’s landscape was the investment made for the 2012 Olympic Games in Stratford, East London.

What was once wasteland, this part of town now has a thriving community built around improved infrastructure and facilities. The tech industry is taking hold here as it spreads further afield from its traditional London base, Old Street. Startups are especially prevalent, thanks largely to the cheaper office space that can be found here.

London is constantly evolving with a choice of historic and new properties

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As for the near future, Crossrail – recently named the Elizabeth Line – looks set to connect east to west in a manner that has been lacking in what is already an extremely well connected city. Property along the new line has already seen dramatic increases, with an average rise of 52 per cent since construction began back in 2009.

Another important development in the pipeline is the transformation of the Greenwich Peninsula just across the River Thames from Stratford. Known as the capital’s single largest regeneration project, this site is being turned into a whole new neighbourhood rather than adding a few homes to an already existing one.

An incredible 15,500 new homes will be built here along with high quality landscaping and improved facilities. The one concern for the new site is the transport links that it currently has available to it. The Jubilee Line will service its link to central London, but with such a vast amount of new property, more needs to be done.

Transport and location

London is undoubtedly one of the world’s most well positioned cities when it comes to international travel. Despite calls for more runways and airport improvements, London still remains the world’s top airline hub with an astonishing 275 people either arriving or departing each minute, 24 hours per day, 7 days per week, 365 days per year. Plus, there’s the Eurostar, which connects London to the rest of Europe via a high-speed rail service.

London has great transport links, including the Tube network.

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Domestically, London has a fantastic infrastructure in place that moves people around the capital brilliantly, although many fear that it is quickly reaching capacity (ask anyone who has travelled on London Underground in rush hour). The Tube (London Underground’s nickname), DLR (Docklands Light Railway) and dozens of overhead rail lines make up the rail network that keeps London moving and the aforementioned Elizabeth Line will join the rest when it opens in 2018.

The capital also has an extensive bus service, one of the world’s largest, that runs 24 hours a day and consists of around 8,500 vehicles. There are over 700 bus routes in London, servicing 19,500 bus stops. The traditional London bus, with its distinctive red livery, is an icon throughout the world.

Other forms of London transport include: black taxis, Boris Bikes (alternative moniker for the capital’s cycle hire scheme named after London’s previous mayor, Boris Johnson), private hire vehicles, trams, boats and even cable cars.

As one would expect, London’s road system is busy. Many Londoners choose public transport over cars, as the congestion in the capital is high, especially at peak times. Even on the outskirts of town the traffic often crawls along, with the average speed on the M25 ring road at rush hour being a mere 10.6 mph. The capital has a congestion charge in place where motorists are charged £10 per day to drive within the charging area that spans much of the capital’s heartland.

However, despite the traffic, there’s no denying that the convenient location on the world map that London enjoys makes it the perfect place to set up a business, a home, or come to study.

Why invest in London?

As we have already outlined above, London is one of the world’s leading cities and is widely regarded as much as a brand as it is a city. Double-digit growth in the capital is not unusual as the demand for housing remains extremely high. This is a trend that looks set to continue for the foreseeable future as the amount of property being built falls woefully short of what is needed.

Foreign investment is strong in London, with money coming in from Asian investors and North American funds. While some of this money will be purely for investments, many of the world’s leading figures in the worlds of business, finance, art, media and entertainment have second homes here, such is the draw that the capital has.

Liquidity is also attractive to investors as the London property market seemingly has its own microclimate within which it operates. Regardless of what is happening elsewhere and no matter how poorly surrounding markets may be performing, London property is always saleable, giving investors the perfect exit strategy should the need arise.

Although it may not be a very tangible factor, familiarity is also a key driver for London’s success. Investors like to put their money into areas they are familiar with and many consider London to be their second city, regardless of where in the world they may originate from. This could be due to the multicultural nature of the capital or even simply the fact that London is so heavily featured in art and media around the world.

With regard to student property investment specifically, London offers a unique investment opportunity for investors. The capital has one of the largest concentrations of higher education facilities anywhere in the world, and the students that choose to study in the capital come from all over the globe to be here.

This means that demand for good student accommodation is exceptionally high. Fill rates are phenomenal and while yields may be lower than elsewhere in the country, security and stability in the London property market keep it attractive – especially as a defensive asset.

Tertiary education in the capital

The opportunities for further education in London are vast, meaning that the amount of students who come to the capital each and every year are way beyond that of any other part of the United Kingdom.

A 2014 report by professional services firm, PricewaterhouseCoopers named London as the global capital of higher education, and when you examine the numbers it’s easy to see why.
In total there are 40 universities here – that’s without the foreign universities that have branches in London – making the English capital the city with the greatest concentration of top tier universities on the planet according to the QS World University Rankings for 2015/16.

Imperial College London is just one of many educational institutes in London

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Many of these seats of learning are institutions that are renowned throughout the world and have been in existence for many decades, with University College London dating back to 1826. However, as one would expect from such a large number of educational facilities, they are not all old and established. London has many modern places to study too, most notably the new international university that was formed as part of the legacy plans from the 2012 Olympic Games.

University Square Stratford (USS) is a £33 million, five-storey partnership campus from existing institutions University of London, Birkbeck and the University of East London. The major new campus is hoped to bring the people of East London much needed improved facilities for higher education, enhancing job prospects for all students who attend.

Why students choose London

We’ve already touched upon the cultural heritage, diversity, history and general greatness of the capital, but are there any other reasons why so many students – both domestic and international – choose to come to London over all of the other options available?

In 2014/15, 359,990 students called London home – 110,000 of which were from overseas – and the reasons why they came here varies as much as the cultures that they left behind. Some will flock here for the free museums, contrasting architecture and restaurants, whereas others will want to experience the hustle and bustle of a major city for the first time and take in the nightlife and social scene that London has to offer.

London really does have everything for the young and adventurous. World famous clubs, bars, pubs, restaurants, theatres…you name it, it’s here. Shopping districts abound, too. Although, student income may prohibit venturing into some of the more expensive parts of town for a little retail therapy.

London is brimming with culture and entertainment

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Of course, there is also the extremely high standard of the universities. London is widely regarded as one of the best places in the world to study, with big names such as Goldsmiths, Brunel, King’s, London School of Economics (LSE), University of Westminster, University of London, Imperial College London, Middlesex University being just a few that are available.

One thing they don’t come here for is the weather. Above all else, the British climate is the biggest gripe that international students have when they choose London for their higher educational studies. But, hey, you can’t have everything.

Want to know more? Check out Everything You Need To Know About Student Property Investment In The UK and 10 Student Property Investment Misconceptions.

If you’re ready to start your investment journey in London, get in touch with Aspen Woolf today.

The London Myth Broken

“Average gross yields of 8% in Manchester compare to 4.5% in London, while a typical two bed investment property costs in the region of £90,000 versus £300,000 in the capital.”

London has always been a hot topic in property investment. But is it really worth the hype?

London always had and most likely will always have demand when it comes to housing. Whether you are based in England or beyond, a quick look at England’s capital will show you that property prices are buoyant, disproportionately so to the rest of the UK. But that doesn’t automatically mean it is a great place to invest.

Of course this all depends on your personal strategy and why you are investing in property in the first place. Whether you are employed or a full time investor, one should recognise the importance of cash flow in property business. Without significant cash flow a portfolio can easily fall into financial difficulties and risk the whole business and portfolio.

When it comes to facts, the costs of buying property in London is much higher than in anywhere else in the UK. While house prices have risen, rents haven’t. At least not near enough to facilitate a good rental return. This leaves an investor with a rental yield far below that which is achievable from other UK cities. A higher purchase price and high mortgage means more pressure on you, as the landlord and investor, to squeeze profit out of the rental income.

Add to this a recent report published by the Office of National Statistics, 58,220 people aged from 30 to 39 left London between June 2012 and June 2013; a record number, and a 10% increase on 2010. Escaping the rat race for the fresh air of the countryside. A huge number are moving to smaller cities that have ten times the charm: Manchester, Birmingham, Leeds, Sheffield, Liverpool and Newcastle. They are no longer willing to be hoodwinked into believing that London is the only place in the country with museums and culture. People simply can’t afford to keep up with the prices and it seems they are no longer putting up with it. Forsaking a “higher” London salary for more spacious houses and a better quality of life in other cities.

For example, from an investment perspective, if you head further north to Manchester, Sheffield, or even Leeds, you can buy a property from £56,250. With rents at £550 – £800 pcm on a single let, that means your overall yield could be 7% and above. And if you find the right area and multi-let the property, or buy multiple units – just imagine what you could earn!

When you turn north, you tend to get 3 times the amount that some of the most known central areas in London currently generate. For example if you look at Totallymoney’s (The credit comparison company) recent ‘heatmap’ of the potential yield from rental properties across the UK you will notice that Mayfair only generates a 2.02% rental yield compared to a 9% rental yield in other northern cities. Even an area as popular as South Kensington, not far from Harrods, only produces a rental yield as low as 1.56%.

London will always be a sizzling focus in terms of property, but it’s seeing its light wane while other cities start to outshine it. So why not save money, get on the property ladder, secure a monthly income, and see a better return?

Quick Recap:

London Yields:

1. South Kensington at 1.56%
2. Mayfair 2.02%
3. Soho 2.02%
4. Chelsea 2.09%

Yields Achievable Outside London:

1. Sheffield 7% or over
2. Leeds 7% or over
3. Manchester 7% or over
4. Liverpool 7% or over

This Article was written by Harri Laitalainen, a property investment fanatic, marketing professional, and chocolate addict.

Note: The views expressed are the author’s own and do not reflect in any way, the views of Aspen Woolf. Readers are advised to carry out their own due diligence before taking any decision.

London Commercial Property

London commercial property market expected to see strongest rental growth in 2015

London’s commercial property market experienced the strongest rental growth in 2014 and is expected it to stay in the lead over the next 12 months, according to a new outlook report.

The recovery in the UK economy combined with low levels of development means that the balance between demand and supply is now swinging in favor of landlords, the report from Schroders also says.

Risks to the positive outlook include the possibility that UK economic growth is much weaker than forecast, so that the upswing in rents stalls rather than accelerates.

‘While rental growth outside London is patchier, some regional markets are definitely coming out of hibernation. Given a reasonably high yield and a further rental growth as the economy improves, we expect that next year will see another solid performance from UK commercial real estate,’ said the firm’s head of real estate Duncan Owen.

The report says that 2014 has been a good year for UK commercial real estate and unleveraged total returns are likely to be close to 20%. Most of this year’s performance has been driven by a favorable fall in property yields, as investors seek income.

‘Looking ahead to 2015 we expect that total returns will remain in double figures, but that rental growth will make a larger contribution. The recovery in the economy combined with low levels of development means that the balance between demand and supply is now swinging in favor of landlords and we anticipate that rental growth will accelerate,’ explained Owen.

In the office sector, the emergence of central London as a powerhouse for international accountancy, law, media and technology companies has pushed vacancy rates back down to pre-crisis levels, not just in the prime locations of the City and West End, but also in less established areas such as Farringdon, Kings Cross and the South Bank, the outlook explains.

‘In previous cycles this squeeze on space and upswing in rents would have triggered a big increase in development and encouraged companies to move to cheaper offices in outer London, or other cities. However, so far we have seen relatively little new office building in central London, partly because stricter capital adequacy rules mean that banks are now less willing to fund projects and partly because competing residential schemes are often more profitable,’ Owen pointed out.

‘Moreover, central London now has such a deep pool of highly qualified labor that some companies are even re-locating to the centre from outer London or the wider South East, even though rents and business rates are more expensive,’ he added.

Similarly, the report says that retail rents in many parts of London are rising on the back of strong population growth. There are also an increasing numbers of young professionals who choose to live in inner London rather than copy their parents and move to the suburbs. This is leading to the rapid gentrification of areas such as Brixton, Hackney and New Cross which were previously relatively poor.

While rental growth outside London is patchier, some regional markets are definitely coming out of hibernation, the report also says. For example, in Manchester the office sector stands out as the strongest of the big regional cities, thanks to the success of its professional services. ‘In addition, we are also seeing good demand for office space in Bristol and Edinburgh and certain smaller markets such as Aberdeen, Brighton, Cambridge and Reading with strong local economies,’ said Owen.

In the industrial market, rents are now rising by 2% across the South East and Midlands and the report says that part of this is due to a cyclical upturn in demand from traditional occupiers such as builders’ merchants, but part is also due to the rapid growth in parcels, driven by online retail.

‘However, we remain skeptical about the prospects for a widespread recovery in retail rents outside London. Although total retail sales are now increasing quite quickly, most of the growth is online and the latest wave of bank branch closures as people convert to mobile banking is a reminder of the structural challenges facing retail property,’ Owen pointed out.

‘In general, the only parts of the sector we favor are convenience stores, which are benefiting from the switch to small basket shopping and retail warehouses, which provide retailers with efficient and affordable space,’ he added.

As far as the investment market is concerned, the firm thinks that the current level of the Investment Property Databank (IPD) All Property Index initial yield at 5.5% at the end of October 2014, represents fair value relative to other assets.

The report identifies three main risks around this outlook. The first is that UK economic growth is much weaker than forecast, so that the upswing in rents stalls rather than accelerates. The second is that over exuberant investors buying in the market push down the All Property yield to under 5% by the end of 2015 and the third is the uncertainty which would be generated if the next Government decides to hold a referendum on European Union membership in 2017.

‘That could be quite damaging, particularly for London. Approximately half of central London offices are owned by foreign investors and the flip side of London’s highly qualified, cosmopolitan workforce is that it is quite mobile and could leave relatively easily,’ said Owen.

‘Overall, and given a reasonably high yield and a further rental growth as the economy improves, we expect that next year will see another solid performance from UK commercial real estate. The latest Investment Property Forum (IPF) Consensus Forecast suggests total returns of between 10 and 12 in 2015,’ he concluded.

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