Rise in overseas-based property investment in the UK
Foreign investment in UK residential property is rising as a growing number of properties are being let by overseas-based landlords in Great Britain, according to a new report by estate and letting agent Hamptons International.
The report found that the proportion of homes held by overseas-based landlords grew to 11 per cent in the first 10 months of 2019, up from seven per cent during the same period in 2018, a record low at that time.
Hamptons International revealed that the growth in interest from overseas investors this year had been the first year-on-year increase since records began in 2010, when 14 per cent of homes were let by non-UK based landlords.
While London emerged as the most popular destination for foreign investment in UK residential property, Wales was the least popular among overseas landlords.
London is being preferred by overseas-based property investors, with 18 per cent of properties belonging to landlords based outside the UK. However, the figure is below the record levels achieved in 2010, when overseas investors held a 26 per cent share of the capital’s properties.
Wales was the only region in Great Britain which recorded a decline in demand from this group, with just 2 per cent of Welsh homes belonging to an overseas landlord.
The increase in demand from investors outside the UK marks a significant turnaround in sentiment, after almost a decade of waning foreign investment.
In December 2018, Linklaters released a report on foreign real estate investment in the UK, which revealed that demand was particularly strong from Asian investors. They estimated that Asian investors held properties worth £3.6 billion in London alone in 2018.
According to Hamptons International, a weaker sterling was likely to be the reason for the increased demand from foreign investors. The average property across Great Britain as a whole saw huge discounts due to sterling’s decline against the US Dollar since 2014.
Most landlords were from Western Europe (33%), with Asians in second place (20%) and people from North America third (14%).
The number of investors from the Middle East fell the most, with a 2.4% decrease compared to 2014.
Aneisha Beveridge, head of research at Hamptons International explained: “Sterling’s depreciation has made investment property in Great Britain more attractive to international investors. The average home cost 23 per cent or £53,065 less than in 2014 for a US dollar buyer, solely due to the currency changes.”
This depreciation discount gave London an advantage over other regions in the UK, as the discount for the average property in the capital was even higher at £107,030.
This higher discount came at a price, as average London house prices stood at £469,640 in October, and the average Stamp Duty bill (including the three per cent surcharge on second homes) was £27,570 for the average home. Hamptons International stated that this was the highest Stamp Duty bill of any region they surveyed.
Despite this, the report added that in many cases, price discounts were sufficiently large enough to absorb the cost of any additional three per cent Stamp Duty surcharges on second homes.
Super-rich overseas investors
Super-rich foreign investors are shunning London’s traditional upmarket boroughs in their pursuit of luxury properties. Investors from this group are now looking beyond the traditional high-end locations such as Kensington & Chelsea and Westminster and preferring borough such as Southwark. The London borough of Southwark emerged as the property investment hotspot for super-rich non-UK investors. They are now snapping up homes in Southwark, with most sales over £5million, which is defined as the super-prime market.
According to Land Registry figures, Blackfriars Road in Southwark saw 16 homes sell for above £5m in the past year, while The Bishops Avenue in Barnet, north London ranked third on the list with 9 sales.
All the Southwark sales were apartments in One Blackfriars, which is located by Blackfriars Bridge in the heart of the capital’s South Bank culture and entertainment district.
The tower has 274 apartments with access to a 24-hour concierge managed by Harrods, along with other high-end facilities.
According to research by private law firm Boodle Hatfield, Avenue Road in Camden occupied the sixth place, with six property sales over £5million.
Although, sales fell in the famous wealthy neighbourhoods of Kensington & Chelsea and Westminster, they still managed to perform up to their reputation and took seven places out of the top ten. There were 262 sales in the area, a fall of 23% compared to last year.
In the rest of London, 107 properties sold for over £5m.
Blackfriars Road was followed by Holland Park Villas, Kensington, in terms of highest concentration of super-prime property, where buyers snapped up 11 homes.
Buyers bought 10 properties in Clarges, a new development by Green Park in Westminster, which included the most expensive sale of the year at £56m.
London streets with multiple sales included Castelnau in Barnes and Queenstown Road in Battersea. Sales outside of the capital reached a new high of 47.
Saskia Arthur, Head of Residential Property, at Boodle Hatfield, said: ‘Belgravia, Chelsea, Mayfair, Knightsbridge and Kensington still remain the key target areas for HNWs who want to purchase properties, but some buyers are more willing to look elsewhere than they were previously.’
‘A lack of stock in these areas, coupled with slightly lower prices for luxury properties with the right level of specification elsewhere, appears to have assisted international HNWs being more flexible over location.’
‘The continued weakness of the pound particularly against the dollar over an extended period has also made London properties cheaper, so there has been an appetite to buy whilst the pound remain low.’
Therefore, London’s has outperformed other regions of the UK and emerged as the most-favoured place for foreign investment in UK residential property. This rise in interest from overseas-based investors has been attributed to a depreciation in the value of sterling which has made it cheaper for non-UK investors to buy a property in London, and the UK as a whole. The capital’s super-prime market also saw a shift as super-rich overseas investors shunned traditional prime property in favour of other parts of the capital.