Asian buyers in London look east

by Nicola Venning， SCMP

Jan 04, 2012

 

When it comes to accommodation, college student Summer Lu has achieved a first. The Hong Kong undergraduate, who is studying at the University of London, is leaving her cramped student digs to move into a one-bedroom apartment in Maple Quays, Canada Water.

"My father decided to buy this property as he knew I was going to be in London for a while. He saw this as the perfect opportunity to buy an investment in east London," says Summer.

Prices in Barratt's Maple Quays - one of several new developments springing up in increasingly popular east London - start from GBP296,000 (HK$3.57 million) for one-bedroom apartments and rise to GBP310,000 for a three-bed apartment.

Lu and her father Philip, a Hong Kong banker, are typical of a growing number of Asian buyers who have invested in 'buy-to-let' or second homes in the gentrifying developments rising in east London.

"During 2010, in prime London as a whole, Chinese buyers bought just under 2 per cent of all property by value, but in the Docklands, they bought 13 per cent of all second-hand property by value," says Yolande Barnes, director of Savills Research.

While European second-home buyers traditionally seek property amidst the gracious, white-stucco-fronted Victorian villas of Kensington and Chelsea, Asian investors are opting for the modern, well-serviced developments being built around the new transport links in east London.

"The eastern buyers can get their heads around the architecture. There are lots of tall gleaming towers which they are used to living and working in," says Matt Leitch from Savills' Docklands branch. Lu agrees. "The transport links to Canada Water are excellent, which were a real incentive as it meant I would never be too far from anything," she says. "We also wanted a new development, as with my father living in Hong Kong, it will be easier for me to maintain on my own."

According to Barratt, the developer, half of the buyers of the 900-apartment Maple Quays at Canada Water in Rotherhithe are buy-to-let investors. Of these, 23 per cent are foreigners, with many from Hong Kong.

The appeal of buying in east London is also an economic one. Prices are under half that of homes in central and west London; apartments in the centre area of Canary Wharf varyfrom GBP580 per square foot to GBP750 per square foot, while in prime districts such as South Kensington apartments are priced at about GBP1,600 per square foot.

Over the next five years, Savills expects mainstream London prices to rise 19 per cent, with more development in the pipeline.

"The London market is still growing," says Gerald Thomas, Barratt's head of sales. "Our Dalston Square development [where two-bedroom apartments now start from GBP365,000] has seen a 20 per cent increase over three years and Maple Quays has shown a 12 per cent rise over two years."

Most of the apartments in these new building developments are in the mid-priced bracket of GBP300,000 to GBP400,000, which is "the average price paid by our overseas investors", says Thomas.

Flat sizes are between 714 and 750 square foot on average, and many offer either gyms or rooftop terraces.

Waterside Park in the Royal Docks, where one-bedroom apartments start from GBP217,000, is located on former factory land.

Renaissance, where one-bedroom flats start from GBP165,000, is built over an old brick-making site in Lewisham, and Thornsett's Lett Road development in Stratford was built on former industrial land and now overlooks the site of this year's Olympic Games.

Thornsett has also developed Chaplin Apartments, a collection of 22 new flats on the site of a former warehouse near the Hackney Empire theatre where Charlie Chaplin once lived and only five minutes from Hackney Central overground.

A two-bedroom, two-bathroom, 714 sq ft apartment starts from GBP365,000. Half the flats have been sold.

Despite the gritty, inner-city feel of much of east London, rental yields of these developments, which are all near to public transport, are 5 to 7 per cent a year, Barratt says.

East London will likely gain from London Olympics in the summer, the recent opening of the GBP1.45 billion Westfield shopping centre in Stratford, and innovations such as a new cable car for pedestrians and cyclists that will link The Royal Victoria Docks to Greenwich Peninsula (also in the summer).

What has really caught buyers' attention is the far-reaching new international transport hub at Stratford. High-speed trains link the St Pancras Eurostar station in central London to Stratford in seven minutes. The extended East London line, as well as the Jubilee and DLR (Docklands Light Railway), are redefining the eastern side of London.

"Canary Wharf has established itself over the last 20 years," says Leitch. "Now the peripheral areas heading to Stratford are blending into a new region."

55%

Foreign buyers accounted for this percentage of prime central London property sales last year, up from 52 per cent in 2010.

London and Paris shine despite crisis

by Peta Tomlinson, SCMP

Jan 11, 2012

Where in the world would you buy property this year, assuming you were brave enough to invest at all?

 

As we enter the uncertain waters of the coming year, Europe remains, as international specialist Property Frontiers puts it, the "one big area of unsettlement". And, as Liam Bailey, Knight Frank head of residential research, concedes, these are indeed confounding times, even for experienced market analysts.

 

Buyer confidence may rest on the knife edge of the euro-zone debt crisis, but we don't build wealth by sitting on our hands. So, for those willing to add to their portfolios this year and with Europe on their minds, the fourth-quarter Prime Global Forecast for last year from Knight Frank offers some insights.

 

To begin, Bailey points to buyer behaviour since the 2008 economic crisis. As stimulus measures and low mortgage rates began to lure the rich back, they tended to focus on luxury real estate in prime markets, regarded as "safe haven" assets. Post-2009, wealth portfolios began to recover, and demand for prime, or luxury, property rose across the world, he says.

 

Then came the next wave of Europe's debt woes, raising the question that Knight Frank asks, and that is whether prime property can be considered "safe" any more? After all, in Europe - and North America - improving conditions in prime markets since 2009 have been set against a backdrop of weak housing markets, stuttering economies, and "a deleveraging cycle which has generally pushed other asset prices lower".

 

"This process highlights a key risk that prime markets will ultimately be undermined by domestic economic reality, with a convergence between prime and mainstream market performance," Bailey says. "If the euro was to collapse, or a similar catastrophe was to strike, all bets really would be off and we would expect much weaker performance across all of our prime markets."

 

Barring such a disaster, though, he expects prime markets will continue to outperform, drawing investment from the wealthy.

 

Which cities will attract these buyers? Knight Frank, by concentrating its report on key residential markets, claims to have secured "a remarkably clear view of wealth, investment and asset market behaviour". From this, it has gleaned that, in Europe, London and Paris top the bill for residential investment for the year.

 

Kate Everett-Allen, from the international residential research team at Knight Frank, says prime markets in those cities should continue to benefit from global wealth generation and their growing reputations as safe havens.

 

"The recent wave of political instability across the Middle East and North Africa, together with economic instability in the southern euro zone and the cooling of the Asian markets, also has refocused investors' attention on the traditional prime markets of London and Paris," she says.

 

"In 2011, over 61 nationalities bought property in prime central London. This represents a new record, and one we expect will soon be broken given wealth forecasts for the world's emerging markets.

 

"Prime central London residential prices are nearly 40 per cent above their post-Lehman low of March 2009 and we are expecting a rise of 5 per cent in 2012. Prime prices in Paris are 22 per cent higher than their recessional low in [the first quarter of] 2009, and here we expect prices to rise by between 5 per cent and 10 per cent in 2012."

 

London-based Patrick Sumner, head of property equities at Henderson Global Investors, agrees London will remain a prime market, especially for wealthy Hong Kong and mainland investors. "There is plenty of evidence of prime apartments and houses in central London being successfully promoted to investors in Hong Kong, Singapore, Shanghai and Beijing," he says.

 

Sumner points to a Savills report indicating that across prime London as a whole, 27 per cent of buyers over the past five years have been from overseas. The value of properties they bought constituted 40 per cent of the market, Savills research shows.

 

Apart from the British capital's inherent attractions as a prestigious city with aspirational property, offering safety and security in a cosmopolitan environment, Sumner adds that London is looking increasingly value-for-money for high-net-worth individuals from Asia.

 

"The fall in the value of sterling over the past three years has made London much more affordable. The [yuan] has appreciated by 27 per cent since September 2008 and the Hong Kong dollar is up by 22 per cent."

 

There is a bonus in the yields. "Although many buy purely for capital appreciation, the letting market in central London is healthy and straightforward," he says. In its 2012 forecast, Property Frontiers tips Britain as a highlight in Europe, but co-founder David Cox concedes that the general consensus for the country is a negative outlook for the year.

 

"People see prices falling in the north, maybe holding stable in the south and the southeast in particular," he says.

 

Nevertheless, that doesn't necessarily mean it's a bad time to invest, Cox says. "Whether the market is falling, rising or stable there are always opportunities to be had."

 

His advice is to consider high-yielding property assets in Britain as a price indicator. "If the yield is good, there is room for capital growth as the market recovers."

 

Beyond London and Paris, Knight Frank expects Geneva and the wider Swiss second-home markets to attract more foreign investment, due principally to the Swiss National Bank's decision to cap the value of the franc.

Everett-Allen says prime property in Moscow, "and many of the other European cities in our forecast, such as Rome and Madrid", is expected to perform well this year, but driven in the main by domestic demand.