STILL IN FAVOUR WITH WEALTHY INVESTORS
A FRESH WAVE OF GLOBAL money is expected to flow into London’s housing market now that the cloud of mansion tax on properties worth more than £2m has lifted. It follows the UK’s Conservative Party’s victory in the May general election.
Housing demand and price growth in England’s capital city were dented in the run-up to the election by talk of a possible increase in wealth taxes as well as higher stamp duty rates that were introduced in December for properties priced above £1,1m.
Latest figures from Pam Golding Properties’ international associate Savills show that prime London house prices fell by 3% in the six months to April.
However, London is likely to remain a favoured destination among well-heeled global real estate investors. And for good reason. A flat bought in London 10 years ago would today be worth 25% more on average, according to Savills. That’s in real (after-inflation) terms.
In some London boroughs, including the likes of Kensington, Chelsea, Westminster, Hammersmith, Fulham, Hackney and Camden, house prices surged 50% in real terms in the decade to the end of April, notwithstanding the credit crisis-induced housing slump of 2009-2010.
If rand depreciation is added to the equation, South African investors who bought a London pad 10 years ago in a high-demand area are likely to have nearly doubled their money.
Though Savills expects central London house prices to drop by 1% for 2015 as a whole, price growth should recover strongly next year (8%).
Savills is forecasting healthy total growth of 25,5% in central London house prices over the next five years. This is on the back of a growing housing shortage and sustained demand.
A UK housing report released by Savills last month reads: “The medium-term capacity for London house price growth has increased as interest rate-rise expectations have softened. The much greater political certainty is likely to restore some of the fundamentals of demand — underpinned by a low interest-rate environment and growing domestic and international wealth generation — resulting in a more buoyant market.”
UK-based property group Knight Frank’s recently released The Wealth Report 2015 confirms that London remains the most popular city for the world’s uber rich. Liam Bailey, Knight Frank’s global head of research, says London is home to the highest number of ultra-high net worth individuals globally, followed by Tokyo, Singapore and New York.
Knight Frank expects London to retain its top spot over the next 10 years as the city further cements its “safe haven” status amid growing geopolitical tension in other parts of the world, which bodes well for continued growth in housing demand and prices.
Bailey cites the strength of London’s education offering as an important underpin for residential property demand. He says a decade ago Russian, Middle Eastern or European children moving into London schools would be starting at age 13.
“Rising competition for places at 13 means a starting age of seven or eight is increasingly the norm.”
SA investors keen to share in the future spoils of the London housing market can either physically take money offshore to invest directly in a London apartment or go the indirect route via JSE-listed Capital & Counties Properties (Capco).
Capco is at present the only counter on the JSE that offers SA investors partial access to London’s housing market, through its Earls Court development and mixed-use precinct Covent Garden (as noted in the story opposite). Redefine International, which owns a number of hotels in and around London, is apparently also looking to add a small London-based residential component to its portfolio.