Asian Investors are now buying more than a fifth of all central London new build properties, and account for almost half of all investment purchases in central London, a new report shows.
The revival of international investment demand for new build property has been one of the most remarkable features of the residential property market over the past 18 months, according to Liam Bailey, head of residential research at Knight Frank.
While the market has returned to life, after it pretty much shutdown in 2008, current international investment demand is almost totally concentrated on London and is primarily coming from Asia, the report shows.
Of the 7,595 new build properties completed in the 12 months to March 2010, 41% of these were bought by investors rather than owner occupiers. Some 49% were bought by Asians of which 11% were from China or Hong Kong, 10% from Singapore and 7% from Malaysia. Some 36% of new build properties were purchased by UK investors.
Knight Frank estimates that over the last 12 months the total volume of Asian investment has totalled £761million and the weaker pound has created a compelling buying opportunity for Asian investors.
Bailey explained that overseas purchasers buy property in the UK for a number of reasons but in almost all cases they are looking for a secure return on their investment. ‘The interaction of currency movements, strong capital price growth and, more recently, rising rents, have created an attractive investment case for many investors considering central London property,’ he said.
‘Despite prices rising by 22% in the 14 months up to the end of May 2010, effective prices in central London were still 32% lower compared to their peak March 2008 level for a purchaser looking to buy in Hong Kong dollars as a result of currency movements. Asian buyers have also benefited from the wealth created from strong Asian price growth. Similar savings have been delivered to Singapore, Malaysian and European buyers,’ he added.
Also rents in London have been rising since June last year and high demand has meant lower void periods for buy to let buyers and the London rental market is regarded as secure.
‘As Asian domestic markets show their own signs of difficulties, Chinese buyers in particular are keen to spread their exposure and invest in markets they regard as more secure than their own if they can get through the regulatory minefield and release the funds. In mainland China, local investors have become more nervous about keeping money in their own country after outstanding credit rose by 30% and at least seven Chinese cities saw their new home prices surge more than 50% over the 12 months to March 2010. The Chinese have built a reputation as strong savers and investors, the relentless rise in domestic property prices since house ownership was legalised in 1998 has encouraged a strong belief in bricks and mortar investments,’ explained Bailey.
Asian investors are also buying properties for their children studying in London. ‘We cannot underestimate the role of UK education in encouraging inward investment into London. Over the past decade the number of Asian students studying in UK universities has risen by 175%. The strongest growth comes from Chinese, Indian and Pakistani nationals. In many cases Asian investors look to buy to cover the period of their child’s university duration and then retain as an investment,’ he added.
A good location, close to a tube station, is vital for Asian buyers, according to Sebastian Warner of Knight Frank’s residential investment team. They also like to purchase near well known landmarks such as St Paul’s Cathedral, The City or the River Thames.
‘Asian investors are shrewd, and much more sophisticated in their research than they were just five years ago. They want detailed insight on the market and locality of the property. New build developments prove attractive as they offer high quality security, facilities such as gyms and restaurants, services such as concierges and secure car parking,’ he explained
The revival of international investment demand for new build property has been one of the most remarkable features of the residential property market over the past 18 months, according to Liam Bailey, head of residential research at Knight Frank.
While the market has returned to life, after it pretty much shutdown in 2008, current international investment demand is almost totally concentrated on London and is primarily coming from Asia, the report shows.
Of the 7,595 new build properties completed in the 12 months to March 2010, 41% of these were bought by investors rather than owner occupiers. Some 49% were bought by Asians of which 11% were from China or Hong Kong, 10% from Singapore and 7% from Malaysia. Some 36% of new build properties were purchased by UK investors.
Knight Frank estimates that over the last 12 months the total volume of Asian investment has totalled £761million and the weaker pound has created a compelling buying opportunity for Asian investors.
Bailey explained that overseas purchasers buy property in the UK for a number of reasons but in almost all cases they are looking for a secure return on their investment. ‘The interaction of currency movements, strong capital price growth and, more recently, rising rents, have created an attractive investment case for many investors considering central London property,’ he said.
‘Despite prices rising by 22% in the 14 months up to the end of May 2010, effective prices in central London were still 32% lower compared to their peak March 2008 level for a purchaser looking to buy in Hong Kong dollars as a result of currency movements. Asian buyers have also benefited from the wealth created from strong Asian price growth. Similar savings have been delivered to Singapore, Malaysian and European buyers,’ he added.
Also rents in London have been rising since June last year and high demand has meant lower void periods for buy to let buyers and the London rental market is regarded as secure.
‘As Asian domestic markets show their own signs of difficulties, Chinese buyers in particular are keen to spread their exposure and invest in markets they regard as more secure than their own if they can get through the regulatory minefield and release the funds. In mainland China, local investors have become more nervous about keeping money in their own country after outstanding credit rose by 30% and at least seven Chinese cities saw their new home prices surge more than 50% over the 12 months to March 2010. The Chinese have built a reputation as strong savers and investors, the relentless rise in domestic property prices since house ownership was legalised in 1998 has encouraged a strong belief in bricks and mortar investments,’ explained Bailey.
Asian investors are also buying properties for their children studying in London. ‘We cannot underestimate the role of UK education in encouraging inward investment into London. Over the past decade the number of Asian students studying in UK universities has risen by 175%. The strongest growth comes from Chinese, Indian and Pakistani nationals. In many cases Asian investors look to buy to cover the period of their child’s university duration and then retain as an investment,’ he added.
A good location, close to a tube station, is vital for Asian buyers, according to Sebastian Warner of Knight Frank’s residential investment team. They also like to purchase near well known landmarks such as St Paul’s Cathedral, The City or the River Thames.
‘Asian investors are shrewd, and much more sophisticated in their research than they were just five years ago. They want detailed insight on the market and locality of the property. New build developments prove attractive as they offer high quality security, facilities such as gyms and restaurants, services such as concierges and secure car parking,’ he explained
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