Why now is a great time for foreign buyers in the London property market

July 8, 2020
Great Time For Foreign Buyers

In this blog we’re talking about why now is a great time to buy in the London property market, given the coronavirus epidemic, many of us being stuck at home for months on end, some others have lost jobs are furloughed, many are wondering if the London property market will be collapsing soon. With fewer buyers and some willing to live further out of London now that it’s been proven that they can work from home. Many may seek open spaces, good schools and better value for money. And while that may be true for some, from a practical perspective, people will need to balance simple things like having truly good broadband service which can be a challenge in many remote parts of the UK.

So while there may be those who will seek to move outside of London or hold off, equally there will be those who will jump at the opportunity to buy in London, particularly international buyers. In this video I’m going to explore why this is a great time for international buyers; make sure to stay till the end to hear which particular international buyers are likely to benefit the most right now. Why is this important? For context, international buyers represent approximately 55% of house purchases in prime central London in 2019.

Forecast of Doom of Gloom May not be Warranted
First let’s give a bit of historical context that may be helpful. Back during the 2008/2009 financial crisis many were saying that the London property market would collapse, yet within months it had rebounded and surpassed previous highs. Over the last ten years UK average house prices have risen 38% but in Greater London that figure is around 73%, and that’s with the cloud of Brexit uncertainty for 3 of those years.

Supply and Demand
The fundamentals of any industry is supply & demand. London has a chronic housing shortage that it is not meeting. The government’s own plan indicates that 65,000 new units per year are needed to meet demand, yet London has consistently under delivered with only 40,000 new units being delivered in 2019. This means that owning a property in London will likely to continue to appreciate as the overall demand for housing is still high.

Key Criteria Specific to London
Other key dynamics unique to London include:

Time Zone benefits – It’s on the Greenwich Meridian, so markets in Asia and the US are reachable during working hours. It is said that you can do business in London 18 out of 24 hours a day.

As an island, it has a natural defense system and borders.

It’s politically and legally stable and has been for hundreds of years. Rule of law is recognised and contracts are legally binding.

Superior education system. London has excellent public and private schools. While there are too many to name, make sure to check out my video on Top Schools in London for Expats to dig in a bit more. · Cultural appeal – London has endless cultural options. While we’ve been under lockdown, many of us are missing and really appreciating how much London has to offer in terms of incredible museums, theatre, music venue and live entertainment.

Appeal to older residents – while many say that seniors will cash out and move to quiet retirement spots; many are actually seeking to live in London. We’ve seen a trend on expanding 55+ developments in London. These residents will want to be closer to their children, perhaps still want to do business, albeit reduced hours; meet up with friends and other contacts and of course, access to culture and transport.

So are you considering buying in London? Drop me a message as to what areas you are considering. If you are thinking of buying in London, make sure to get my free London Buying Guide which outlines all the steps to finding the perfect property.

Foreign Exchange Rate
Going back to our list of factors impacting international buyers, London is heavily affected by exchange rates that are currently very favourable to many international buyers. The British pound remains weak compared to other foreign currencies, as worries over Brexit talks continue. The pound is trading at 1.1050 against the euro during the end of June which is at the low range of its trading band. Pound to USD is around $1.23 which is also at the low end of the range.

In addition, mortgage interest rates are historically low, so leveraging your investment is definitely a wise thing to do.

Another key driver will be that the government announced in March 2020 an additional 2% stamp duty surcharge to any non-UK resident purchasing a residential property. This is on top of the 3% surcharge for any purchase that is a second home. This is due to take effect April 2021, so we expect an uptick of activity in 2020 by international buyers ahead of this going into effect.

Hong Kong Buyers
So as you can see the fundamentals of buying London property are sound and now there is additional incentive to beat the government’s latest stamp duty increase for foreign buyers, which makes now a great time for international buyers. So which foreign country may best benefit in the short term? The answer is the Hong Kong. Hong Kong buyers are poised to increase their already active purchases in London with the prime minister recent announcement that he was willing to put them on a “route to citizenship” in the UK. This effects about 2.85 million people in the region as currently about 350,000 people hold British National (Overseas) passports and another 2.5 million are eligible to apply for them.

There are multiple dynamics that make investing in London very appealing to Hong Kongers right now. There is political unrest at home, the weakness of sterling, falling London property prices, the government’s pledge to impose an extra tax on foreign property buyers from April 1, 2021, and now the promise of extended visa rights and possible citizenship has led to a big rise in inquiries and sales.

Investing in London is already with about 15% of residential sales above £1M in prime central London since the general election on December 12, 2019 have been to buyers from Hong Kong and they account for 20% of deals above £10M. They are one of the most active international buyers in the London property market and, according to the Office for National Statistics, own 98,725 homes in the capital.

It goes to show that the appeal of the London property investment is not just based on the fundamentals of London as a global capital city but also relative to their own domestic issues. You could argue that this is the case for many foreign nationals who live in countries with their own issues. For wealthy residents, diversifying their investment portfolio with international properties, particularly in London makes a lot of sense.

So if you’re thinking of buying whether you are overseas or already live in London, make sure to leave me a comment below, I’ve also got a super helpful free London Buying Guide that has all the steps you’ll need to find the perfect home.

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