Financial Mail - Investors Monthly - - Feature - Joan Muller

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.


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