Bargains possible in London
Covid-19 prompts Thais to accelerate plans to acquire property in UK capital, says Savills Thailand
Thai investors are expediting their plans to purchase property in prime locations in London, as the Covid-19 pandemic provides an opportunity and reduces their overall portfolio risk.
The pandemic and subsequent lockdown have had a severe impact on Britain’s economic performance in the first and second quarters of this year.
With a gradual recovery and an easing of the lockdown pending, the prospects for the real estate sector and the economy at large remain hopeful.
“With the baht maintaining its strength against the pound over the past 12 months, the value proposition appears to be the best in recent memory,” said Prapaporn Boonkajornkul, head of agency services at Savills Thailand.
“Combining this with the likely drop in property prices, Thai investors stand to benefit from this moment of global uncertainty.”
Real estate activities were officially allowed to resume on May 13 as the British government took steps to ease some of the lockdown restrictions in line with the falling number of cases.
As the lockdown continues to lift, Savills expects to see a gradual revival in the pace of transactions, especially thanks to a likely rush from pent-up demand during lockdown inactivity.
The speed of the UK economic recovery will vary according to the success in the government’s management of the pandemic; if successfully managed, a strong rebound is anticipated, said Savills.
If recovery is delayed, or if there is a second wave of viral infections, economic recovery would also likely be delayed.
Savills predicts the price of property in Britain will decline by between 5-10% because of the immediate effects of Covid-19.
However, it maintains a countrywide forecast of a 15% property price increase over five years.
While the pace of the recovery may vary, the underlying demand for housing will ultimately drive prices.
Even with the likely reduction in transaction quantity this year, which is directly due to the lockdown restrictions and a more cautious attitude among investors, buyers who can act in the short term could stand to benefit from fewer competing buyers in the market, while still benefiting from the long-term capital gains being forecast.
Savills found Thailand’s high net worth individuals, who may be suffering a reduction in net wealth values because of the decline of the stock market, are looking to move their wealth into real estate assets during this low-yield period to reduce risk in their portfolios.
London continues to be viewed as a safe long-term investment, one that is particularly attractive in times of volatility, such as the one we are experiencing, said Savills.
Ms Prapaporn said areas such as Kensington, Marylebone and Mayfair, which have traditionally been favoured by wealthy Thais, have maintained their appeal and appear to be even better value thanks to the positive exchange rate.
“Buyers who act before April 2021
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Prime London real estate prices in baht terms are down 49% from their 2014 peak.
are also avoiding the increased stamp duty, making this unprecedented time in history an even greater time to act,” she said.
Covid-19 is having a sharp impact on the British economy, and the prime London property market will certainly be affected by both temporary price falls and slower transactions.
However, even before the lockdown began, values in prime central London were down 20% from their 2014 peak. When considered alongside the strength of the baht, current levels are equivalent to a discount of 49% for a buyer with baht.
“We expect prime property will lead the recovery in the short term as buyers look to benefit from the strong value proposition,” said Ms Prapaporn.
“Long-term growth will be dependent on global wealth creation, which is expected to return once the current pandemic has been bested.”