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The capital as a tax haven

Many more foreign buyers are now exploiting a stamp duty loop hole, reports Susan Emmett.

The Exchequer is losing millions in tax revenue as more top London homes are traded behind scenes through offshore companies. Demand for property in the best postcodes, much of it from foreign investors seeking a safe haven for their money, has continued to push up prices in prime London locations, bucking the national downward trend. Yet many of the highest-value transactions are not recorded by the Land Registry or subject to property tax. With stamp duty land tax (SDLT) now at 5% for homes that sell for more than £1mil, the number of multimillion-pound property deals conducted through offshore companies is rising.

Hamptons international estate agents say that 30% of the homes they have sold in Central London in the past 12 months were traded between offshore companies. Most of those deals were worth more than £4mil, although a number went for far more than that. James Wardle, Director of the Knightsbridge office, says that the stamp duty increases in April is an incentive, but that more offshore companies have been set up as Central London market becomes more global. He adds that even if homes are bought on the open market, some overseas purchasers are incorporating their new property into an offshore company, which means that any future sales are unlikely to be recorded by Land Registry. The absence of these deals from official data suggests that prices in Central London are rising more than records show.

The latest land registry figures indicate that the capital is the only part of the country in which prices have risen over the year, with average values increasing by 2% in the 12months to August. But prices in the 2 boroughs of Kensington and Chelsea and City of Westminster, where the most expensive properties are located, went up by about 10% and 8% respectively. Strong demand for deluxe new developments such as Candy & Candy’s One Hyde Park, where prices stretch up to £130mil, has inflated the figures.

Richard Barber, a partner at W.A Ellis estate agents in Central London, says that the recent sales at One Hyde Park, the “Bulgari” penthouse in Knightsbridge and Roman Abramovich’s purchase of a £90mil mansion in Kensington Palace Gardens emphasise how many wealthy foreign buyers see prime Central London property as “indestructible”, “a safe haven” and a “must have”. These buyers are drawn to London for its relative safety, its schools and universities and its position as a leading financial centre. The weak pound and favourable tax regime are also attractions.

London is also something of a bargain. A recent report by Knight Frank, the estate agent, shows that compared with Hong Kong and St Petersburg, where prices have risen by 16.1% and 12.2% over the past year, price growth in London, at 8.3% is relatively modest.
Although there is no guarantee that the London market will not be adversely affected by the global financial crisis, agents agree that bricks and mortar in the capital’s prime postcodes will continue to attract wealthy overseas buyers. Some groups appear to be more active than others. Chinese investors, for example, are targeting new-build flats in areas such as Docklands and King’s Cross.

Camilla Dell, Managing Partner at Black Brick, the buying agents, anticipates an increase in the interest from the Middle East “There is more confidence coming out of the UAE as the economy stabilizes and a renewed desire to hold a diversified international property portfolio” she says.
But beyond the buzzy London postcodes, prices are falling in the capital’s outer boroughs. Croyden, in South London, has been particularly hard hit, with prices falling 1.8% over the past year. The land Registry also recorded falls in Lewisham, Hounslow, Bexley and Barking and Dagenham.

Declining values have been blamed on shrinking demand as potential buyers find it difficult to raise a mortgage. However, unlike many of the purchasers in Central London, these struggling byers also need to pay Stamp Duty if their property is worth more than £125,000.

Island London

It used to be that when London did well, the rest of the country did well a year later. Not any more

Graham Norwood reports on the UK’s “Two Markets”

Like rolls of a camera film and coin-operated phone boxes in the street, the housing market has its share of nostalgic but outdated concepts. one of them it seems, is the old “ripple effect”, when market fortunes in London gradually extend to the rest of the country. Experts say that might be a thing of the past. Instead, there is near-consensus that what drives London’s market today- especially in prime Central areas- is for the first time quite unlike the factors which affect other areas.

Figures in all price sectors support the argument that London now operates separately from the rest of the UK. Look, for example, at the Nationwide’s house price data for the second quarter of 2011, compiled by lending data to buyers predominately at the mid-range and bottom end of the market. Average values were down year-on-year in all regions except London. The average price in London was 0.2% up in the quarter while across the rest of UK there was a 1.2% drop.

“The change from previous cycles is the perception of real estate in London’s most sought after postcodes as a unique and safe asset- one which offers a degree of protection from the vagaries of the global economy and geopolitical risk. In addition London has very tight planning restrictions which keeps supply tight. Supply and demand dynamics are widely different in London compared with the rest of the UK, with London constantly seeing demand outstripping supply. The rest of the UK is much more of a domestic buyers’ market and therefore much more susceptible to a weak economy and a weak mortgage market” explains Camilla Dell of buying agency Black Brick.

Untroubled waters. Can vastu bring health, wealth & domestic bliss as its adherents claim?

By Lucy Warwick-Ching

Vastu is the new feng shui – or, rather, the old one, given that some say the former inspired the latter.

… around 40 per cent of the world’s most expensive real estate is bought by Asian buyers for whom the “energy” of a house can be important – and vastu is already impacting on non-Asian design.

Water is a particularly important element of the five (earth, air, fire, water and space) that must be aligned in a home designed to fit with the principles of vastu, an ancient Hindu system of architecture and design. In return, according to vastu followers, the homeowner sleeps better, gets richer and enjoys domestic bliss.

Global developers and property consultants are also beginning to recognise vastu. “Many of our Indian clients are into vastu and so we have had to learn the principles behind it to help them with property searches,” says Camilla Dell, managing partner at Black Brick Property Solutions in London. “The critical question for us is the positioning of the front door,” she says. “If it faces south there is no point in us even showing the property to a client. South is the energy point; the belief is that if the door faces south then all the energy will flow out of the house.”

Where Russia’s billionaires buy houses

We were delighted to be interviewed for a recent radio programme on “The Voice of Russia” about why and where Russia’s billionaires are buying property.

The Voice of Russia was the first radio station to broadcast internationally. On the air since October 29th 1929, VOR has been shaping Russia’s image worldwide and introducing Russia to the world and highlighting its opinions on global events. Today VOR broadcasts to 160 countries in 38 languages for a total of 151 hours per day, on short and medium waves, in the FM band, via satellite and through global mobile communications network.

We hope you enjoy the interview and please feel free to email or call us with your comments.

Owning a house at Mayfair is the latest status symbol for India’s nouveau riche

LONDON: In a district in north-west London that is a favourite nesting ground for bankers from all over the world, a premium housing project suddenly found itself making distress sales after the recession. They sold one flat to an Indian.

“And then another, and another, and now about two-thirds of this building are owned by Indians,” says Mark Pollack, managing director of Aston Chase, a property consultant specialising in north London. They’re coming from Mumbai, Delhi and a bit from Bangalore, and though still a trickle, even tier-2 cities like Ludhiana and Chandigarh.

They’re swarming all over Knightsbridge and Chelsea with budgets as modest as £500,000 all the way up to £20 million. London’s prime property market, which has overseas buyers – mostly Russians, East Europeans and from the Middle-East – pouring in over £3.3 billion annually, is now sitting up to take notice of this new breed of Indian buyers in the mid-level segment.

These are mostly young, small businessmen and entrepreneurs, and upper middle class parents of kids studying in London acquiring their first overseas property. Astudy by top-end property consultant Savills estimates that Indians have now grown to make up 4% of buyers in prime central London, 6% by value, and have an up to 9% share in the £5-15 million range, with an average spend of £3.5 million.

Not many Billionaires

A home in Mayfair, it seems, is now a must-have status symbol for India’s nouveau riche, as well as a viable investment avenue. Says Camilla Dell, managing partner of Black Brick Property Solutions, London’s largest independent buying agency: “We’ve seen a significant shift in the past two years, more people want to buy. When people become wealthy, they like to own overseas property – a home in London is seen as a trophy asset.”

Black Brick has done £25 million in deals last year, starting from £500,000, though Dell says demand usually goes from £4 million up to £20 million. Nothing’s changed at the ultra-premium-over £15 million-segment. Says Andrew Langton, managing director of Aylesford International: “There have been a few high-profile deals, and I’d say the top 100 richest Indian families have already built up their overseas property portfolio.”

Not enough billionaires, but plenty of millionaires. The action has moved down the value chain, to the wannabe rich listers. Yolanda Barnes, head of research at Savills points out that, “Indians are an often neglected but important cohort of buyers, especially in the £5-15 million range. Out of the emerging nations, they’re more important than the Chinese.

“The Chinese haven’t quite arrived in London yet, sticking to East London and Canary Wharf with relatively low-ticket investments. While most Indians refuse to look beyond Mayfair, Chelsea, Belgravia, Kensington-prime central London-there is some drift to other areas as well, where there are established Indian communities.

Pollack of Aston Chase, which works in the Hampstead and area and has done high-profile super-premium deals in the past, says they are recently doing a lot of business in the £2-5 million range, and his clientele is “unarguably younger”. Rajan Shori of law firm Manches says his firm started the property advisory practice simply as an add-on service for Indian clients, and its success has taken them by surprise.

London’s luxury homes continue to rocket in price

Luxury-home prices in central London rocketed upwards at their fastest rate of increase for a year during May. The pound’s weakness on the international currency exchanges helped to encourage a large number of overseas buyers to compete for a declining number of properties for sale, according to agency Knight Frank LLP.

Residential property in the US $6 million bracket saw values jump by +1.4% on April, the seventh straight monthly increase. The market was up by 1% in April.

Homes in upmarket areas like Knightsbridge and St. John’s Wood have seen their prices rise by a third since March 2009, topping the peak reached in March 2008.

The volume of homes for sale in London is 5% down year-on-year says Knight Frank.

“For many investors and potential owner-occupiers based in fast-growing emerging countries, prices of prime central London property are actually well below the 2007 peak in their own currency terms,” adds Camilla Dell, managing partner and founder of Black Brick Property Solutions LLP. Her London-based company advises luxury-home buyers in southeast England.

Also, competition is increasing for properties in need of renovation because there’s a shortage of fully-equipped homes on the market, says Stuart Bailey, who heads Knight Frank’s Belgravia office. “We had sufficient demand that we didn’t even need to do any formal marketing.”

According to Bailey, only one of the 15 homes that his team has sold for more than £10 million in the past 12 months has gone to a UK buyer. Overseas property investors are definitely dominating the market.

London Luxury-Homes Price Gains Accelerate on Overseas Demand

Luxury-home prices in central London rose at the fastest pace in a year in May as the pound’s weakness encouraged overseas buyers to compete for a declining number of properties for sale, Knight Frank LLP said.

Values of houses and apartments costing an average of 3.7 million pounds ($6 million) increased 1.4 percent from the previous month, the London-based property broker said in a statement today. That’s the seventh straight increase and compares with a 1 percent gain in April.

The cost of buying homes in neighborhoods such as Knightsbridge and St. John’s Wood has climbed 33 percent since March 2009, topping the peak reached in March 2008. The number of homes for sale is 5 percent lower than a year earlier, while prospective buyers registered with Knight Frank increased 10 percent.

“For many investors and potential owner-occupiers based in fast-growing emerging countries, prices of prime central London property are actually well below the 2007 peak in their own currency terms,” said Camilla Dell, managing partner and founder of Black Brick Property Solutions LLP. Her London-based company advises luxury-home buyers in southeast England.

Since Britain’s mainstream housing market peaked in September 2007, the pound has declined 20 percent against a basket of currencies, Bank of England data show.

‘Degree of Safety’

“For international investors scouring the world for unique assets with a degree of safety that aren’t exorbitantly valued, prime central London continues to fit the bill,” Dell said. Prices are unlikely to fall soon because the shortage of properties is fueling competition between purchasers, she said.

More foreign buyers are coming to London because of political and economic instability in their home countries, Knight Frank said. London’s role as a global financial center and the reputation of its universities and private schools are also attractions.

“We have a couple of Egyptian clients who are active at the moment and, with an early Ramadan this year, we’re expecting a busy June and July,” said Johnny Turnbull, managing partner of Turnbull Property. The London-based property broker acts for buyers of top-quality homes in the city.

Finding new or recently renovated homes has become harder after banks reduced their real-estate holdings and curtailed finance for development, improving the prospects of the few projects that do proceed.

One Hyde Park

Earlier this month, property entrepreneur Christian Candy’s CPC Group said it had sold 46 apartments in the One Hyde Park development for a total of 974 million pounds. CPC has agreed additional sales worth 120 million pounds. A one-bedroom duplex show apartment in the development decorated and furnished by Candy & Candy, the interior-design company owned by Christian and his brother, Nick, fetched 9.85 million pounds.

Competition is increasing for properties in need of renovation because there’s a shortage of fully-equipped homes on the market, said Stuart Bailey, who heads Knight Frank’s Belgravia office. Two of the last three homes that needed work, with prices ranging from 6.5 million pounds to 19 million pounds, sold for more than the guide price, he said.

“We had sufficient demand that we didn’t even need to do any formal marketing,” Bailey said. Just one of the 15 homes Bailey’s team sold for more than 10 million pounds in the past year went to a buyer based in the U.K., he said.

The average price of a London home advanced 0.8 percent in March from a year earlier, while values in other parts of the country dropped, according to the most recent Land Registry data. Prices in England and Wales fell 2.3 percent, the Land Registry survey showed, as lenders granted fewer mortgages and government budget cuts reduced household incomes.

Knight Frank compiles its luxury-homes index from estimated values of properties in the Mayfair, St. John’s Wood, Regent’s Park, Kensington, Notting Hill, Chelsea, Knightsbridge, Belgravia and South Bank neighborhoods of London.

Editors: Ross Larsen, Andrew Blackman.

Wealthy Arabs arriving early in London

By Carina Kamel

LONDON — It’s not usually until summer is in full swing that wealthy Arabs descend upon London, but this year, along with the unusually warm weather, the rich have come early. As the Arab spring sweeps across the region, Middle Easterners seeking refuge for their cash are snapping up million-pound properties in the British capital.

From early reports that Gamal Mubarak, a son of former Egyptian president Hosni Mubarak, was hiding out in his Knightsbridge townhouse during Tahrir Square protests, to squatters taking over Saif Al Qaddafi’s Hampstead mansion, London and its prime properties have figured in the Arab uprisings.

But it is not just sons of autocrats who see London as a haven. Arabs with money to spare believe a London home–in prestigious neighborhoods in Knightsbridge, Mayfair or Belgravia—is the safest investment for their cash. And a recent report by upmarket estate agents Savills says prime London property is seen as a gold standard asset.

“In the same way gold is a hedge against inflation, a safe haven for wealth, central London property is seen in the same way,” said Yolande Barnes, Director of Research at Savills. “Somebody buying here can be sure their investment is safe.”

Another high-end property company, Knight Frank, noticed a surge in interest from the Middle East in the wake of political instability in the region.

“The turmoil in the Middle East and North Africa has had an impact in terms of driving demand into London,” Liam Bailey, head of research at Knight Frank told Al Arabiya. Mr. Bailey said the biggest impact thus far was Middle East buyers coming to the market earlier than usual this year, bringing forward the traditional Arab-buying season by almost two months.

Arabs and other foreign buyers make up about 75 percent of purchases in the premier segment of the market, which includes properties starting at least at £10 million (the equivalent of $16.5 million). And in the face of limited supply all this foreign demand is driving prices up in the capital.

The latest report from Rightmove, the UK’s biggest property Website, showed asking prices in London reached their highest ever in April and prices in central locations are up 8 percent so far this year. This is particularly striking given that prices elsewhere in the UK remain stagnant.

And as regional instability continues, London is seen as a no brainer for Arab investors: it combines the benefits of a political safe haven with a global financial center and favorable tax conditions. The pound’s relative weakness against the Euro, the pullback in house prices in 2010, and a desire to hedge against inflation, all add to the appeal.

Many buyers make their purchases sight unseen, agents said.
That was the case for Samuel Bikhit, a British-Egyptian agent who sold three properties the week after former Egyptian president Hosni Mubarak stepped down. Egyptian businessmen working in the industrial, textile and food industries bought properties for prices ranging from £3.5 million ($5.8 million) to £5 million ($8.28 million). Mr. Bikhit confirmed that at least one of the sales went through without a viewing.

“Nobody loses money in London,” he said, explaining how a one-bedroom apartment in the 1980s would have sold for about £75,000 ($124,300) but now averages around £400,000 ($662,993). “In 30, years we have seen prices go up by several multiples. This is a small example of how you can’t lose money, especially in central London. It is money well invested,” he said.

By chance, Mr. Bikhit happened to be in Cairo during Tahrir protests and was approached by many Egyptians. They were unsure how the political situation would pan out, and they were keen to put their money in London. He has clients from around the Middle East and is planning a trip to the region where he plans to market some his prime properties to wealthy Gulf nationals.

Another agent, Camilla Dell of Black Brick Property Solutions, said enquiries from the Middle East have doubled since the beginning of this year and that she is seeing interest from a wider range of countries.

“We have always had a strong client base from Egypt, the UAE, Saudi and Lebanon,” Ms. Dell said. “However, since the crises we have noticed an increased diversity and we now have clients from Iraq, Yemen, Jordan and Bahrain.” Black Brick is currently seeking properties worth a total of more than £20 million ($33.1 million) on behalf of Arab clients.

(Carina Kamel is a correspondent in Al Arabiya’s London bureau. She can be reached at carina.kamel@mbc.net. Lucy Stuart, also of Al Arabiya in London, contributed to this report. She can be reached at: lucy.stuart@mbc.net)

Chinese Investment in UK Property

Chinese individuals are growing in wealth and stature. With this rapid increase there is a growing need for them to diversify their wealth. Lower rents and property values in the UK has made London an increasingly interesting prospect.

Until recently Asian investors were still only a small presence in the market, around 5% of the £500k -£1m valued market. They are however growing. Liam Bailey, head of residential research with real estate agency Knight Frank, stated that Asian investors are now buying more than a fifth of all central London’s new properties, and account for 49 percent of all investment purchases in central London. Savills also notes that Chinese investors are some of the most active in the city

What has caused this?

The Asian luxury property market has seen its prices soar. Hong Kong has experienced a 45% increase in its prices since 2009 according to leading property firm Savills. Singapore has taken steps to prevent its property market overheating. It is likely mainland China and Hong Kong will take similar steps. These restrictions and heightened prices have forced Asian investors to look elsewhere to find property. London has become increasingly attractive. The city is seen as stable source of income, cheaper (property prices have fallen in the UK due to the economic crisis), and provide access to higher education for their children.

Camilla Dell is a Managing Partner at Black Brick. A property search and acquisition company in central London they look after high net worth, mainly international, clients who are looking to buy residential property in London. She states: ”The attraction to London is that many international buyers very much view London as a safe haven. At a time when many investors are still nervous about equities, property is the one thing they feel safe investing in’. This can be seen looking at recent buying trends, as seen above.

Chinese investors spent approximately £170 million ($260 million) buying up newly built properties in central London in the 12 month period ending March 2010. A weaker pound and tightened real estate policies in Asia have driven this trend. Britain offers the advantage of low restrictions on whether foreigners can own real estate, and a fairly fluid rental market, which is attractive to buyers seeking income from their properties. Buying residential property for investment is more attractive as, according to Knight Frank (another leading property firm), rents have risen 16% in 2010 and are due to rise further in 2011 – 8% according to Savills. Investment buyers can now expect between a 4 to 5% yield, coupled with real prospects for capital appreciation over the next 5 years. With interest rates at 0.5% in the UK, this is a compelling reason to buy residential property for many investors.

These figures and the increase in the number of new builds appearing on the market, which are generally very popular with Asian investors, are likely to make London more popular. Two such new projects are Telegraph Hill and Henry Moore Court. Both developments are located in prime areas, Hampstead and Chelsea respectively. Hampstead today is a colorful blend of the old and new. At its heart it retains the feel of a village community, but within easy reach of central London. Fashionable restaurants and bars, boutique shops and main high street names with the proximity to the Heath have established Hampstead as one of the loveliest places to live. Chelsea has long been a prime residential area within the Royal Borough of Kensington & Chelsea, appealing to many successful and international figures in business, the arts, music, and design who recognize its unique atmosphere, and choose it as their London residence.

The Telegraph Hill development offers an exceptional opportunity to buy a beautiful home in a unique location. The atmosphere is calm, relaxing and spacious with unique attention to detail. Telegraph Hill’s gated domain offers the privacy and security that discerning residents will consider essential. The Henry Moore Court is the planned development of an exclusive collection of two villa houses, 15 luxury apartments and 38 secure parking spaces, is currently underway and due for completion in Autumn 2012. The apartments, over four storeys, will be built to an exceptionally high specification offering the highest level of security and privacy to residents. The scheme includes a subterranean car park, private gymnasium and full concierge service. Charles Symons Jones from Alpark Ltd feels that Henry Moore Court “This exciting new build residential development is a rarity for Chelsea and one of the few schemes to be undertaken for ten years in this exclusive area of London; resulting in attracting interest from the discerning buyer.”

Some of the most expensive buys have been by high profile Chinese. This can be seen recently with Joseph Lau spending £33m on a mansion in Eaton Square. This is also the development where Roman Abramovich, one of the worlds richest men, has a property. Property firms are increasingly trying to target these high net worth individuals organizing events in China to educate investors on the London market. More are opening offices in Hong Kong and the mainland
(such as Hamptons) to expand their presence and sales. Some developers are even dropping the number 4 from new projects to cater to the Chinese market.

Bill Lindsay, a Barclays Director specializing in property, has stated that London will continue to be the best investment choice both for residential and commercial property. Outside of London he warns that the UK market is poor. Mr. Lindsay highlights the City and West End best locations for commercial investment, and areas such as Kensington, Chelsea, Hampstead, St John’s Wood for residential. Ms. Dell also highlights the importance of these areas ‘While you get less space for your money, the potential for capital appreciation is much higher. In addition, there is a wider tenant demand in more central locations, and therefore the investment is less likely to suffer from void periods’. Buyers also need to remember to tread carefully keeping in mind the desirable location and the right building when looking at UK property deals. Buyers often forget that estate agents in the UK are working for the sellers and are simply trying to sell a property for the highest possible price. They won’t tell you if the property will or won’t make a good return on investment and mistakes are often made, which is why impartial advice is fundamental when buying property, whether for investment or as a home.

A modern world in a period shell

By Graham Norwood

From the outside, Carrick Villa looks like a perfect neighbour for the rest of the architecture fringing Regent’s Park in central London.

The villa may be just two storeys, detached and with four bedrooms, but it is at one with the terraces laid out nearly 200 years ago by John Nash. Carrick’s exterior is painted in the same cream as the other 600 properties lining the park and regulated by the Crown Estate. It even has the same crenellations as the larger house next door.

Step inside the villa, however, and you see how mistaken you were. This is no period gem, but a modern one. There are no architraves, ceiling roses, cornices or panelled rooms, which you will find in the rest of the park’s houses. Instead there are modern hardwood floors, smooth lines and walls with keypad-controls and touch-screen panels.

Wander around and you find programmable lighting scenes, a media-room equipment hub and air handling (that’s air conditioning to you and me).

This is a modern wolf in traditional sheep’s clothing. But that, after all, is the point.

“It’s got all the toys inside, but from outside it looks like a period house that was put up with the rest of those around Regent’s Park,” explains Daniel Daggers of selling agent Knight Frank. “Contemporary features are now mandatory in a house at this level of the market in this location. This is why people pay a new-home premium.”

It is quite a premium. At £7 million (Knight Frank, 020 7586 2777; www.knightfrank.com) Carrick Villa is an example of a trend sweeping house building. Homes that look old on the outside yet are strikingly new behind the front door. Properties like these appeal to buyers with an eye for classical design, but who have a fast-moving professional lifestyle ill-suited to the restrictions on improvements that come with the real McCoy.

Some of the new houses following this ”old outside’’ trend use parts of genuine period buildings. These are often large schools, hospitals and offices. Then new flats and houses are built alongside or even within.

Other developers, as with Carrick Villa, build completely from scratch, skilfully making the architecture of the modern building blend in with its older surroundings.

For buyers, the advantages are numerous. Firstly changes can easily be made, from turning a cinema room into a gym or knocking through two rooms to make more space for the family. The genuine period building would probably be listed, making those substantial modifications difficult, at best.

They also come with guarantees for the equipment and usually for the structure, too. This is reassuring, even for affluent buyers.

“Many international clients love period features, but are fearful of buying properties that are very old. The perception is there’s a higher chance of something going wrong,” says Camilla Dell of Black Brick, a buying agency that finds homes for high-net-worth purchasers, often from overseas.

“New-build property that replicates period styles offers the perfect compromise,” says Simon Barnes, another buying agent.

There is no shortage of evidence that the trend is catching on. For example, house builder St George is constructing a scheme of 90 flats and houses in what, at first sight, appears to be a Georgian terrace at Camberwell, south London. In the main, however, these are new-builds.

“It was important for us that the scheme retained the distinctive character of the original buildings and respected the conservation area in which it stands,” says St George’s Mark Griffiths.

There are plenty of other examples, often in areas rich in ”real’’ period and vernacular architecture where local planners have forced developers to emulate traditional design.

Retirement developer Beechcroft, for example, has built houses for the over-55s at Stow-on-the-Wold using traditional Cotswold stone, giving the scheme a 19th-century look (£395,000 to £465,000, 01451 833809; www.beechcroft.co.uk).

At Cleveland Court, situated between the commuter towns of Dorking and Leatherhead, a development of 15 homes has been built as a grand Georgian house. The whole scheme sits in four acres of parkland with views to Box Hill (£575,000, Savills, 01483 796810; www.savills.com).

“This combination of old appearance and new construction is a good thing,” Daggers says. “It gives people established style and modern convenience. It’s the best of both worlds.”

Pros

Little maintenance for first few years
Well-equipped, well-planned
Good energy efficiency
Often with parking

Cons

Rooms can be small, particularly spare bedrooms
Gardens are sometimes small
Style can lack character, especially inside
Often ”thin’’ walls, so limited sound insulation

Buyers from Arab countries hit by unrest snap up London ‘boltholes’

By Richard Warrem

Arab businessmen, some connected with Middle Eastern regimes toppled by popular uprisings in January and last month, are buying London “boltholes”.

London estate agents Kay & Co has sold two homes to Middle Eastern businessmen since a popular revolt in Tunisia triggered anti-government uprisings across the Middle East.

“One purchased on our recommendation without viewing,” managing director Martin Bikhit said.
His firm had received 17 enquiries from Arab buyers, including eight from Egypt, since the unrest started. They were looking for central London homes in the £4 million (HK$50.6 million) to £20 million range. ”

Bikhit said buyers were “mainly wealthy businessmen, all of whom will have had a loose association with the former regime but not necessarily an intimate one. They are mainly looking for `London bases’, but given the size of some of the homes being sought, we feel that these individuals are looking at spending more time in the UK than before, with some admitting they are trading up from smaller homes they already own.”

The buyers were mainly interested in purchasing homes in the districts of Mayfair, Knightsbridge, Kensington and Bayswater, Bikhit said.

Central London property search company Black Brick has helped Arab purchasers complete deals on two homes since the unrest began.

Camilla Dell, Managing Partner of Black Brick, said her company had received six enquiries from Middle Eastern buyers, which was higher than usual for the time of year.
The buyers included Saudi Arabians, Lebanese, Egyptians and Bahrainis. Budgets ranged from £500,000 to £20 million, Dell said. “We anticipate enquiry levels will get higher as the year goes on,” she said, “It’s slightly early days at the moment.”

London buyers agency Property Hunt had received 10 enquiries from Middle Eastern clients. The company’s managing director, Russell Hunt, said this level of interest was “far more than normal. People from the Middle East are gauging what and where to invest in London as it is seen as a safe market, or looking for somewhere for them and their families to use in case there is further unrest – in other words, a London bolthole”.

Howard Elston, associate director at Aylesford International, said growing demand for London homes from wealthy Arabs could mean sales prices increase. “I am sure it will add another pressure on the price of prime property in London, but I think it will not be seen overnight,” he said.

While the central London property market…

By Camilla Dell

…has begun to cool, and prices have started to flatten out, the rental market continues to be extremely active, which is good news for buy-to-let landlords and investors. The rental market has significantly changed over the last two years. While 2008 saw an unprecedented volume of rental stock which pushed rents down as a result of ‘forced landlords’ who could not sell, or did not want to sell in a falling market, 2009 was characterised by a far more normal volume of rental property as the sales market started to pick up. The year 2010 has by far been ‘the year of the rental’, with many areas now seeing a severe shortage of supply. At the same time, the volume of prospective tenants has been very strong this year.

A recent Knight Frank report showed that, compared to the last two years, 2010 has seen an increased number of new tenants for most months, which has helped landlords to raise rents through the year. Countrywide, the UK’s largest residential estate agency also revealed that there were a record-breaking 61,000 tenants entering the property market in the third quarter, an increase of 19 per cent from the previous quarter. There is also an average of 5.8 tenants currently vying for every one property in the market—a tempting prospect for any buy-to-let investor.

Another report, by Savills, shows that prime London rents rose by 2.7 per cent over the third quarter of 2010, taking year-on-year growth to 12.3 per cent and leaving rents just 3 per cent off their peak of March 2008. Interestingly, there is a huge geographical variation. Areas of North London, such as Hampstead and Islington have enjoyed the strongest rental growth at 4.2 per cent in the third quarter, an increase of 14.4 per cent in the year to date. The growth is coming from increased demand for smaller properties from city tenants.

At Black Brick Property Solutions, we have recently bought several one- and two-bedroom flats for our rental investment clients, and have secured tenants within a matter of days after completion of the purchase. Void periods are also at an all-time low, with many tenants renewing year on year.

High mortgage deposits

Another explanation for the buoyant rental market, particularly at the lower end of the market, is the availability of finance. With most mortgage lenders requiring a hefty deposit of around 25 per cent, many would-be buyers simply cannot afford to buy and are thus forced to rent. It is not surprising therefore that the lower tiers of the prime London rental market have seen the strongest growth over 2010 as caution among tenants and reduced corporate allowances have concentrated demand.

At the upper end of the rental market, there is increased supply, and static demand for family housing is stalling growth. However, according to Savills, in prime South West London the particularly strong sales market this year has reduced the supply of rental properties as accidental landlords returned properties to the sales market. Additionally, needs based family demand has continued, pushing the rental value of houses up by 11.2 per cent in the first six months of 2010. However, the rate of price growth slowed in the third quarter as demand from young professional sharers, as well as families became aligned with supply over the summer months.

Property investment pointers

Our advice to our investment clients has always been that investment into the London property market should be in prime property, in the best locations, as this will attract the best possible tenant. Options in Mayfair, Hyde Park, Marylebone, Kensington, Regents Park and St Johns Wood will bring in attractive rental yields, while also offering good long-term capital appreciation—an important consideration when buying Central London property. Generally, we feel that two-bedroom apartments in locations near to good shops and a tube station make the best rental investment, appealing to the widest tenant market. One-bedroom apartments, while high in demand, have perhaps less chance for appreciation as there is a limit on what someone will pay for these. We would advise investors to avoid ground or lower-ground floors. New builds are good from a maintenance and management perspective, but investors should remain wary as the potential for capital appreciation is not as good as it is with period properties. High-density developments in
particular should be avoided. As an indication of rents achievable, in the most established areas of prime central London you can expect a two-bedroom investment flat to rent for between £800 (Dh4,740) and £3,000 (Dh17,760) per week, depending on size, location and condition. In the more periphery areas, such as St Johns Wood and Notting Hill, a two-bedroom property will achieve anything from £500 (Dh2,960) upwards.

The future longer-term outlook for the rental market also looks positive, with many would-be buyers adopting a ‘wait and see’ approach, this could provide a further boost to the rental market. Knight Frank predicts that rents are likely to outperform significantly this year and next, but return to a more traditional pattern of growth from 2012. With low borrowing rates in the UK, and a healthy rental market, now is a good time to be considering diversifying into the prime central London property market. But it is important to remember that it pays to take advice to make sure you are investing in the right kind of property, in the right area, in order to attract good tenants and rental returns.

London’s International Communities

By Liz Rowlinson

International buyers account for a considerable proportion of those spending money in London on property, from Hampstead to Mayfair.

For centuries, London has been a magnet for incomers from all over the world. The 17th century brought Huguenots, Sephardic Jews and the Irish; the 18th saw influxes from the Americas; and the revolutions of the late 19th century brought refugees from across Europe. Today, the city’s benign tax regime and gold-standard property market lure the 50 different nationalities currently house-hunting in central London and redrawing the ex-patriate map.

At the top end of the market, overseas buyers now account for 60% of purchases in Mayfair, Knightsbridge and Hampstead, according to Knight Frank. The Russians are most active at the top, with Knightsbridge and Mayfair tempting the most. Tim Macpherson, head of London residential sales at Carter Jonas, agrees, adding: ‘They go for mostly flats and penthouses in portered buildings in Mount Street and Lowndes Square, as well as Park Lane and the Eatons [Square and Place]. They prefer these areas to Chelsea, and spend £3 million to £30 million.’

They also like kerb appeal, and go for the best-looking buildings, according to Roarie Scarisbrook of buying agents Property Vision. ‘In the mid 1990s, oligarchs began fighting over the most impressive properties, and now, their newly monied neighbours from Kazakhstan and Uzbekistan are copying them by buying statement houses and the most glitzy and secure apartments.

These offer the ultimate status symbol. Highly serviced buildings with doormen that tip their hats appeal to Russians -for example, Trevor Square, Lancelot Place, Hans Crescent and The Knightsbridge.’ Last summer, the city’s reputation as a safe haven for wealth also attracted a wave of Greek tycoons keen to transfer their assets out of troubled Athens.

Although, traditionally, Greeks have bought in Bayswater and north London, the new ‘cash Greeks’ have made a real impression on Mayfair in the first half of the year, according to Peter Wetherell of Wetherell. ‘Properties in Grosvenor Square were in high demand as the Greeks prefer large, lateral apartments in a portered block as pied à terres.’ Camilla Dell of Black Brick Property Solutions adds that Greeks and Cypriots are also buying investment properties: ‘They’re buying 20-odd one- or two-bedroom flats in the £500,000-plus price range, with high rental yields.’

Indians are now 20% of her client base, and share the desire of the Russians and Hong Kong Chinese for prestigious addresses in smart, portered blocks. ‘Indian buyers especially like Onslow Gardens and Onslow Square and buildings with grand entrances. Hong Kong Chinese clients want a front door facing north, for the correct feng shui.’ For Americans, Hampstead has been the big hit, according to Marcus Oliver of Chesterton Humberts, and they have recently accounted for 80% of foreign buyers in the area. ‘There’s an American School in nearby St John’s Wood, and young buyers like high-end properties just off the High Street in roads such as Cannon Place. They love the quintessentially English feel of the Village, Kenwood House and the family-friendly Heath.’

For Italians, a tribal love of world-class shopping and stylish bars has meant a 30-year love affair with Chelsea, according to Ed Mead of Douglas & Gordon. ‘A series of domestic tax amnesties has brought northern Italians, especially the Milanese, seeking elegantly proportioned conversions and traditional houses. They like areas where they can be seen out and about-around Sloane Square, especially Sloane Gardens and Draycott Place-and spend £500,000-£1.5 million.’

The French cluster around the Lycées of South Kensington and Wandsworth, as well as Battersea. ‘They go for the rows of large family houses (especially off Trinity Road, Clapham Northside and Northcote Road),’ says George Franks of Douglas & Gordon.

The French like to live laterally, as they do in Paris
Russians rate sleek and high-end decor, the latest gadgets and fingerprint recognition systems
Indians and Nigerians like their kitchens to be separate to cut off cooking smells
Far Eastern buyers need new-builds (period means water and heating problems)
The Italians must have period; they hate modern
Chinese love new-build waterfront properties, especially around Tower Bridge

End of a golden era:

By Richard Warren

Home values plummet throughout the country as mortgages dry up, with only London’s high-end real estate escaping the trend

A mortgage lending squeeze will result in property prices falling across Britain, but London’s most desirable residential districts will be least affected, analysts say.

Net mortgage lending in Britain has fallen 90 per cent in three years. The gap between new loans and repayments will narrow to £10 billion (HK$123.8 billion) this year compared with £100 billion in 2007, the Council of Mortgage Lenders (CML) reports. The body warns there could be negative net lending – more mortgages repaid than loaned – next year because the number of new mortgages is shrinking.

Many lenders have withdrawn from the home loans market. The CML was unable to complete this year’s top 30 mortgage lenders’ table because there are only six principal lenders now.

Investors, the self-employed and first-time buyers struggle most to get a mortgage – they must put down larger deposits than before the credit crunch and have fewer mortgages from which to choose.

Hong Kong and other overseas buyers must go through more credit checks, put down larger deposits and contend with frequently changing lending rules when dealing with High Street banks.

“The golden age of home ownership is over, for the moment,” Michael Coogan, the CML’s director general, told a housing conference last month. “Mortgage rationing has limited activity and left pent-up borrower demand unfulfilled since 2007.”

The CML believes the Financial Services Authority’s (FSA) proposals to regulate interest-only mortgages will make mortgages scarcer. In an interest-only mortgage scheme, a borrower pays interest on a monthly basis and repays the principal after a specified period, usually 25 years.

The CML warns interest-only schemes could “vanish” if the FSA’s proposals are implemented. Fearing the FSA’s proposals will increase costs, lenders are withdrawing interest-only loans from the market and considering forcing customers to convert to capital repayment mortgages. In a capital repayment mortgage scheme, part of the principal is repaid each month with interest payments.

At present, two-thirds of new mortgages are interest-only, which the FSA believes encourages homebuyers to borrow more than they can afford to repay.

Liam Bailey, head of residential research at property consultancy Knight Frank, says Britain’s housing market will go into a double-dip downturn if interest-only mortgages are withdrawn.

“There is no doubt that prices would fall, and access to the market would be constrained,” Bailey says. “There [is] a huge range of borrowers who use interest-only mortgages as a legitimate method of accessing the market, [such as] older borrowers, and self-employed [people].

“The most concerning issue is that lenders are now looking at taking existing interest-only borrowers off interest-only arrangements. This would be damaging and would threaten the sustainability of [many] current borrowers’ finances.”

The FSA also wants to ban self-certified mortgages – which limit checks on information borrowers give about their financial status, and are thus considered open to fraud. Banning them would reduce the number of loans issued, especially to self-employed people, the CML says. Banks are cutting mortgage lending regardless of official intervention. They are withdrawing from the buy-to-let loans sector. Landlords will welcome the news that Paragon Mortgages, the specialist buy-to-let lender that suspended operations during the credit crunch, has resumed lending.

From next year, British banks will have less money available for mortgage lending because they must begin repaying £300 billion of funding provided by the government during the credit crunch.

Prime central London residential markets, such as Knightsbridge, Mayfair and Chelsea, are likely to be less affected by mortgage cuts than Britain’s mainstream housing sector because wealthy buyers rely less on borrowing.

Camilla Dell, managing director of Black Brick, a buyers’ agency that specialises in prime central London, says many purchasers in the area pay cash. “Twenty-five per cent of our clients are cash buyers,” Dell says. “Well over 50 per cent could buy in cash if they wanted to. Even if they do decide to take finance, many of these international buyers are high-net-worth individuals and therefore banks are happy to lend to them.”

Prime central London’s housing sector is performing better than the market nationally. According to the Land Registry, prices were 12.7 per cent higher in the Royal Borough of Kensington and Chelsea in August compared with the previous year. Nationally, they were 6.7 per cent higher.

Bailey says the dislocation between prime central London’s housing market and the rest of Britain is sustainable.

“This is due not only to greater wealth inequality in the UK, which has happened despite the recession, but also the fact that international buyers concentrate their activities in London, adding hugely to demand and price pressures here,” Bailey says.

In prime central London, half of homebuyers come from overseas, Knight Frank’s research shows. Hongkongers and mainlanders comprise the largest group of overseas investors in central London’s new-build market, making 5 per cent of purchases, the agency reports.

Prime central London is likely to be less affected by public sector cuts than mainstream Britain because most of the residents work in the private sector, including financial services firms which are expanding.

“There has been a lot of positive news coming from the city [financial sector] and many management consultancy firms are recruiting in large numbers,” Dell says. “It would take another mega global financial crisis to see a repeat of the 2008 price falls we saw after Lehman Brothers collapsed.”

Dell forecasts prices will stay flat in prime central London over the next 12 to 18 months.

Prime central London holds opportunities

By Vernon Baxter, freelance writer

Scope for capital appreciation and popularity among overseas investors drive demand for units in UK capital’s posh neighbourhoods.

Even the world’s top property markets have their ups and downs. Despite central London’s reputation as one of the safest property markets around, the wealthy residents and property owners of Mayfair and Knightsbridge in July experienced a phenomenon the rest of the world knows only too well: negative equity. When the figures are compared with the rest of the world, however, owners of prime central London properties won’t be expecting much sympathy. Since the London market bottomed out in March 2008, owners have experienced a steady period of recovery, according to the Knight Frank Prime Central London Index. For 15 consecutive months, the market has rebounded strongly until prices dropped by a staggering 0.5 per cent. As property crashes go, there’s been worse. Indeed, Knight Frank is still confident that its forecast of 5 per cent price growth for 2010 across central London remains on track.

Locations advantage

It is a testament not only to the inherent strength of the London market, but to its enduring popularity with overseas buyers. In fact, in its report, Knight Frank attributes the 15 months of strong growth to the continued demand for property from overseas buyers. “There are always international buyers, who are making money and will invest in London, irrespective of general market conditions,” comments search agent Simon Barnes, owner of Simon Barnes Property Consultants. But, there is no great secret to success when buying in London, says Barnes. “I would advise buyers to go for as central as they can afford. It is better in most cases to buy a smaller flat in a prime location, than spend the same amount on a house in the suburbs, but avoid large developments. Prime locations such as Mayfair, Belgravia, Notting Hill, Knightsbridge, Kensington and Chelsea will always do well.”

Rental prospects

The thing about investments overseas, however, is that—by definition— you’re not going to be around to enjoy them all year long. Which is why the majority of international buyers who are attracted to London properties subsequently let them out to high quality tenants. If anything, the rental market is stronger than the property market itself, claims Tim Hassell, director of Draker, a prime Central London lettings agency. “From a landlord’s point of view, London is considered by tenants to be one of the most desirable cities in the world to live and work in,” he says. “This means that, providing they have purchased intelligently, they will always have an abundance of reliable, high-calibre tenants to choose from.” Indeed, letting properties in prime central London tends to be a straightforward process as the majority of tenants are ‘white collar’ professionals. However, these white collar professionals have not been entirely sheltered from the global economic storm and Hassell reminds investors that boom times don’t go on forever. But, sometimes stable can be just as good as spectacular. “Even through the recent economic downturn, the lower to mid-range lettings market has remained comparatively stable with only a slight drop in rents,” says Hassell.“But, it is, in fact, the stability of the lettings market combined with low interest rates that have enabled many investors to keep hold of their property portfolios. This is especially true with developers who have not normally been involved with the lettings market. When things get tough in our city, people turn to a more temporary solution—they rent rather than buy.” Still, as with any market, the London rental sector can ebb and flow and it is worth bearing this in mind when deciding when to enter the market.“The rental market is always relatively fast paced, with things reaching fever pitch in September and early October,” Hassell adds.“That is the best time to let out a property as demand seriously outstrips supply.”
Expected yields

But, what sort of returns should investors expect from the London market? Hassell says that values of central London properties have historically risen by between 8 and 9 per cent each year, but he points out that — even in this remarkably stable market — there are no guarantees. “The return is not a straight line and can consist of a great many years of flat prices followed by one or two years when prices increase by 20-30 per cent per annum,” he says. Which is why the long-term letting of properties is a good way of ensuring you don’t sell in a fallow year, he argues. “As long as you are able to hold the asset over a market cycle, then central London property should be a good investment. Importantly, the asset could provide a yield of 4-5 per cent per annum as long as you have a good lettings agent involved who can find the right tenants and manage the property for you.” Camilla Dell, from independent property search agency Black Brick Property Solutions, agrees that letting out a London investment can be the most effective approach for overseas buyers.“It is very active,” she says.“As well as the corporate tenant market, London also has a large private tenant sector, consisting of people who would ultimately like to buy but can’t afford to get onto the property ladder.”

Agent costs

Of course, letting through an agent is going to cost money. But due to the competitive nature of the London market, the agent costs are not prohibitive, says Dell.“Typically, you are looking at paying between 8 and 11 per cent per annum of the total annual rental income received on the property to a lettings agent to rent the property for you and then an additional 5 to 6 per cent to a managing agent if you decide to have the property professionally managed,” she says.“Many of our overseas clients choose to have their properties professionally managed.”

Expert opinion counts

So, if London is the market for you, how do you get started? The London market is clearly no stranger to international buyers, but it is always worth seeking advice, says Hassell.“Purchasing property in a foreign country is never easy. However, as long as you have a good solicitor acting for you, then the process should run smoothly,” he says.“There are no restrictions on foreigners buying property in London but, dependent on the purchaser’s country of origin, there may be certain benefits in buying in a company name rather than an individual name.” It is also preferable to arrange finance in the UK—or at least in UK sterling —rather than a foreign currency as it will remove the risk of currency fluctuation. “Large international banks should be able to provide sterling finance in any country and, therefore, it depends on the purchaser’s preference and the interest rates available,” says Hassell. Buyers should beware, however, if they plan on getting directly involved in the property search, warns Dell.“Remember, estate agents in the UK act on behalf of the sellers. So, without seeking a source of impartial advice elsewhere, buyers have little way of knowing whether they are getting a good deal or making a sound investment,” she says. “At Black Brick, we have witnessed the fallout from several misguided purchases where the buyers failed to seek independent advice on their investment. One West African client came to us having significantly overpaid for a property, on the premise that it was located in a prestigious area in central London—St John’s Wood —when in reality it was located in the less sought-after adjacent neighbourhood of Kilburn. He experienced no growth in this asset and is now seeking our advice on his next property purchase. “Likewise, many foreign buyers invested in a new build development in Fulham, south London, which experienced a 20 per cent decrease in price during the downturn. We advised our clients not to buy in this development as in our view, high-density apartment blocks in secondary areas do not represent good investment.”

Nevertheless, Dell insists that canny investors should have no problem with the market.“With the right advisers, it’s very straightforward,” she says.“The most common mistake foreign buyers make is not to seek proper advice before making a purchase, which can end up being costly.”

An investment for life

Even then, there are very few investments in London that time can’t heal. And once you buy in London, you won’t be in any hurry to leave the market, says Gary Hersham, director at top-end London agency Beauchamp Estates. And an investment in London can be an investment for life and beyond.“In terms of safety of assets and capital, there is nowhere safer in the world,” says Hersham. “No one can or ever will take your asset away from you. If you have ownership or title of a property, effectively it is yours forever, unlike other countries were such entities as ‘tax police’ or ‘the State’ can come along and appropriate your property.” It may sound dramatic, but given that many London investments from overseas buyers stay in the same family for generations, it is certainly reassuring. “We have the best and most secure property title in the world,” says Hersham. “Once a property is conveyed and title deduced, no one can claim thereafter that they, not you, own it.”