International buyers investors buying up London’s prime new build property, research reveals
The prime London new build residential market is now being driven almost exclusively by international buyers, generating a net £1.4 billion inflow of equity in 2011, according to new analysis from international real estate adviser, Savills.
This means that its dynamics have more in common with Hong Kong and Singapore real estate than with the wider UK property market, it says in a new report.
Much of this overseas equity has been generated from off plan sales, prior to completion and helped to forward fund some of the significant projects that are changing London’s skyline and helping to regenerate significant areas of the capital, the report points out.
As recently as 2009, UK buyers accounted for three quarters of the prime London new build residential market but, in 2011, almost two thirds of buyers, some 63%, were international. At the top end of the market, international buyers were responsible for 88% of all new build sales in the prime central area worth over £5 million.
It also reveals that a clear line is being drawn between old and new. People from the world’s new economies, primarily Asia Pacific, Russia and the Commonwealth of Independent States (CIS), are a different type of buyer to those from the older economies such as the UK, North America and Middle East, whose buyers have been coming to London for decades.
Buyers from the new economies are much more likely to buy new build and have concentrated their buying in the new, up and coming areas of London, paying a premium for quality and rarity of product.
Numerically, overseas buyers in the new build sector, especially in the east of City markets are dominated by Pacific Asians and Chinese. This group accounted for 37% of buyers in 2010 and 33% in 2011, compared to just 4% in 2009. This not only reflects concentrated marketing efforts in these regions but also an appetite for investment and willingness to commit to sales off plan, before completion.
Buyers from Hong Kong, China, Singapore and Malaysia, dominate the apartment market, at lower price points than most other overseas buyers, although buyers from the Chinese mainland are relatively small in number and buy some of the cheapest properties due to the difficulties they have in expropriating their currency. Many are buying apartments for offspring in higher education in the UK.
‘Were the Chinese restrictions on property ownership overseas to be lifted and the Renminbi a globally traded currency, the Chinese propensity to spend could be vastly increased. We have estimated in the past that the Chinese billionaire market could move London prices by as much as 15%,' said Yoland Barnes, head of research at Savills.
In contrast to Pacific Asians, buyers from Russia and other Commonwealth of Independent States (CIS), as well as the Middle East and North Africa (MENA) are more likely to buy in the £5 million plus range in prime central areas.
At this price point international buyers totally dominate the market, accounting for 88% of sales of new build sales over £5 million compared to 64% in the second hand market. Almost three quarters of sales are to buyers from Eastern European and CIS countries (47%), the Middle East and Africa (24%).