Sunday, April 11, 2010

London presents capital opportunity

The quicker-than-expected recovery in property markets in many countries may have caught many investors by surprise.

Property investors looking for investment homes to ride on this recovery may have missed out on the recent boom that saw Singapore’s private and public resale home prices rise a further 5.1 per cent and 2.7 per cent, respectively, in the first quarter of this year.

But looking further afield, analysts have identified one particular market that presents tremendous potential for upside in the coming 12 to 18 months – London.

In the space of a little more than a year, the English capital’s market has seen a shift from near market meltdown to boom rates of price growth, said Knight Frank head of residential research Liam Bailey.

‘The selling power of London as the quintessential ‘global city’ is still compelling, and we’ve seen the market bounce back post-crash very quickly,’ he told The Sunday Times.

Prices crashed by up to 30 per cent at the height of the crisis, some even more in distressed sales, but have recovered some 10 per cent to 15 per cent in the past 12 months.

Even with the recovery in prices, London homes are still 30 per cent below their 2007 peak prices for Singapore investors because of the weak sterling, added Mr Bailey.

The British pound has fallen substantially against the Singapore dollar in the past year or so. One British pound is now about S$2.13, down from about S$3 or more.

London developers are conducting roadshows across Asia to tap interest by overseas investors.

Knight Frank and Savills Singapore are marketing in Hong Kong and Singapore several properties such as Neo Bankside, a 197-unit luxury project next to the Tate Modern and close to the Millennium Bridge and St Paul’s Cathedral.

There are one- to three-bedroom apartments from 539 sq ft to 1,750 sq ft on offer beginning from £1,000 per sq ft (psf) (S$2,130 psf).

There are also attractive homes below the £1,000 psf level to consider: London’s southside Canary Wharf’s Pan Peninsula – recently completed – is re-launching up to 30 or so leftover units in Asia. The project features two towers of 40 and 48 storeys offering 420 and 340 apartments, respectively.

When it was launched in 2006, prices for the apartments were north of £1,000 psf. Now, the units are being priced from £750 psf, a spokesman for the project said.

CB Richard Ellis’ head of residential development agency Jonathan Seal noted that new development projects being built should do well. ‘Local buyers are often unwilling to purchase off-plan, so those happy to do so will do well,’ he added.

Looking ahead, London properties present further upside, said Jones Lang LaSalle’s director of capital markets Chris Brett. ‘Due to the lack of development in the past two to three years, supply is tight for properties across Central London,’ he said.

However, before you invest, always ensure you are buying from a known developer with a good track record and buy with a National House-Building Council (NHBC) warranty, said Mr Seal.

‘The property market may be erratic. Although the UK economy is beginning to improve, we have an election on May 6 and a new government will have to implement strong measures to deal with the country’s deficit. This may suppress the property market in some areas,’ he said.

Singapore investors usually buy to rent out. Typical rental yields of up to 5 per cent can be achieved. Non-British residents are not taxed on capital gains, and since Singaporean investors are not taxed in Singapore either, this makes London properties attractive. They need to pay tax in Britain on their rental income, though. The properties are not difficult to sell, where rules are concerned.

London has a good record for capital growth. The key is buying where transport is good and where there will not be an oversupply of new property, he added.

‘Returns at 5 to 10 per cent should be possible over the next two to three years, and the rental market has remained robust, with average returns of 3 to 4 per cent per year,’ he said.

Source: Sunday Times, 11 Apr 2010

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