Kings Gate, Victoria, Central London by Lynch Architects, 
an extremely high-spec scheme by the largest listed development company in the UK, Land Securities

Any visitor to London will have noticed just how much construction and refurbishment is currently underway across the city. Part of it is due to the construction of Crossrail, a cross-town trainline that by late 2018 will halve travel times between east and west (as well as to Heathrow) and is often vaunted as the largest infrastructure project in Europe. Yet a lot of the buildings going up also inlude mixed-use or residential schemes, with some located in the centre and many in more outlying – but well-connected - neighbourhoods such as the Olympic neighbourhood of Stratford in the east or the area around the world-famous Wembley Stadium in the northwest. 

A recent survey by the New London Architecture think tank revealed that a staggering 236 buildings measuring more than 20 storeys are on the way in London alone, 80 per cent of which will be residential and high-end. These statistics alone give a good idea of the sort of property hotspot London continues to be for foreign investors.

London Calling

There are many reasons Asian investors choose to buy in London. The first is that London is viewed as one of the key global economies says Charlie Walsh, head of International Development Sales at Savills, “facilitating trade between east and west.” 

Rory Cramer, a senior residential development consultant at CBRE, a leading international real estate services firm, goes even further. “London has really become a commodity rather than just a property investment. It’s almost like gold.”

The verandah at Kings Gate offers views of the Buckingham Palace

The space feature an open concept with a loft-like feel

“Whenever there is a financial, environmental or social crisis in a part of the world,” he continues, “Prime central London sees a flurry of activity because it is considered a safe haven.  Add to this a pound that still comes at a healthy discount against the Singaporean Dollar (SGD) and a legal system that is well-established, robust and relatively simple from a bureaucratic point of view and you can see why investing in London continues to be hugely appealing.” 

Purchase Versus Investment

But overseas buyers aren’t only looking for rental income or capital appreciation, they often plan to make use of the world-class cultural and education facilities that a city like London offers. “Long-term education is a massive factor for purchasing,” agrees Cramer. “We see many people buying for their children who are often still at school.” 

“Though not all recent development in London has been aesthetically pleasing, the importance of great design can’t be underrated either.” says Toby Courtauld, CEO of Great Portland Estates (GPE), whose property pipeline is entirely based in central London.

And he has a point. GPE’s upcoming Rathbone Square, a mixed-use scheme with 142 apartments ranging from studios to 4-bed flats, was designed inside and out by MAKE architects (whose founder Ken Shuttleworth worked at Foster’s for many years and designed London’s iconic Gherkin tower).

Rathbone Square at Fitzrovia, Central London, is steps from the future Crossrail station

With its thoughtful and rich use of materials, contextual height and central green square open to the public in a part of town sorely lacking in garden space, it is one of the most tasteful and well-integrated residential schemes to go on site in central London in recent times.

What’s more it is located in the quirky, peaceful and quintessentially London Fitzrovia quarter, a part of London’s West End that has been underrated and undervalued as a residential area. Until now, that is, with schemes like Rathbone Square and a Crossrail station opening soon a few hundred metres away.  

The Sports Hub

Another scheme with a difference is located in Wembley Park in northwest London, home to Wembley Stadium.

The Wembley Park development by Quintain is situated close to the area's popular sporting hub

Facade of Wembley Park 

Though it’s the multi-million pound penthouses being sold to foreign investors that grab most of the headlines says Maxwell James, CEO of Quintain, the developer behind the mammoth 85-acre Wembley Park regeneration scheme, Singaporeans have taken a shine to the 475 homes being built in a one-acre park next door to the Stadium precisely because of the more reasonable price point.

“These one- and two-bed flats are priced between £350,000 to half a million, a lot size that is attractive to people.” 

Upscale service offerings available within the premises

The living areas

Returns On Investment

Returns on London property are generally attractive too. CBRE’s five-year growth forecasts for prime central London is between five and seven per cent but Cramer suggests this is a very conservative picture. 

“It’s kind of a minimum that we would expect people to achieve subject to the market conditions.” Moreover, due to restricted housing supply and availability the rental market is expanding he says. 

“The rental market is incredibly strong and people are really focusing on that at the moment,” agrees Maxwell James, adding that this is why Quintain has decided to offer a dedicated management team to people looking to lease out their flats. 

In terms of rental returns most London agents speak of gross yields of circa 4 per cent in central London, which includes schemes like the 41-storey residential South Bank Tower located south of the river in an area at one time considered a fringe district but now very much a part of central London. 

Bird's eye view of the South Bank area

Prime executive living space at South Bank Tower

Prime Considerations

So far so rosy, but are there any less positive factors that potential buyers should keep in mind? “Being aware and up-to-date on how potential new taxes could affect you is definitely one to be aware of,” advises Cramer. “Because you don’t want to have an investment strategy that is based on out-of-date information.” 

Much has been made of the introduction of capital gains tax on foreign property owners who sell a residential property in the UK. “Often with these potential new taxes that are looming, the impact is felt before they are even applied as people hold off making a decision,” says Cramer. The change should come in to force in April 2015 but Cramer suggests consulting with your preferred solicitor to get the full picture. 

Toby Courtauld of GPE believes the increased tax burden is not very dramatic.

“The playing field has simply been levelled between existing UK and overseas buyers.” He continues: “Taxation is still much less in London than in New York, Hong Kong or Singapore.”  

Are locals being left behind?

Mayor Boris Johnson recently asked the country’s leading developers to commit to marketing new homes to Londoners first, or, failing that, at the same time as they are made available for sale to buyers from other countries. 

Most developers who have signed this so-called Concordat have opted to market the homes simultanously at home and abroad but say that there is no reason not to market the homes in the UK as vigorously as abroad since the market has picked up significantly domestically too.  

Part of the reason schemes are marketed to Asian and foreign investors more heavily at first explains Cramer is that developers need the capital and culturally Britons are reticent to buy off-plan, partly because they have little experience of new-build properties. 

South Bank Tower is situated closed to the city centre

“We are selling South Bank Tower to UK purchasers,” he continues, “but what we find is that in the UK buyers tend to want to see the product and kick the tyres. Agents have better traction in the UK market when they have a marketing suite or fully fitted-out kitchens and rooms to show. In Asia, on the other hand, because of the way cities have developed, buying off a plan is very familiar to them and has been for the past 10-20 years.”

To the question of whether Londoners are being priced out of the local housing market and having to look ever further afield for affordable homes, Charlie Walsh at Savills believes foreign investors are providing much-needed rental solutions. “There is a real shortage of quality rental properties on the market for locals, therefore with foreigners being able to purchase and then let them out to local Londoners, this is a great fix.”