Gulf investors continue to rush to buy London bargains since Brexit backlash. The devaluation of the pound (as previously reported on DMZ) has seen London now the cheapest place in the world to buy a Louis Vuitton handbag, according to Deloitte! Londoners should see this foreign investment as a positive to the continued investment in construction within our capital.
Tim Fallon, the vice president for international corporate communications at Damac, “Clients are very excited. They see an opportunity with the lower pound. They see that developers are more flexible today, offering payment plans and on prices. So they are seeing an opportunity, they are seeing greater value.”
Foreign investors have been previously seen as the scapegoat for high rents and high prices. A housing shortage in London drives up house prices. This creates an opportunity for overseas investors, who pour in money to speculate on further price increases. Speculation increases demand, which pushes up prices further, making the cost of housing much higher for Londoners, leaving many stuck in expensive rented accommodation and unable to afford to buy a house.
Savills estate agent estimated that in 2014 just 7% of buyers in the Greater London property market are from overseas. In the prime London market, meaning the most expensive properties – which accounts for less than a 10th of the city’s whole housing market – the proportion of foreign buyers hits 32%.
Housebuilding in London is rising, but still around half the level needed to meet demand. There was a 35% annual rise in the number of completions during 2015, hitting 24,620 new homes. Around 33% of these were classed as “affordable”.
Foreign investors have been targeted with a number of tax increases, from stamp duty to capital gains. The Mayor of London needs to be aware that foreign investors are important to London property, helping to spur construction and bringing more money to the city.
Andrew Frost, head of residential at the property firm JLL, urged Khan earlier in the year to “be clear that international investment, and therefore off-plan purchasers of London residential property are vital to underpin construction activity, employment and crucially affordable homes. New supply is the only long-term solution to London’s housing crisis and all policy efforts must be towards ensuring Londoners see the homes built that they need.”
Naomi Heaton, the chief executive of the London Central Portfolio, a specialist residential property adviser focusing on prime areas of the UK capital, said that the top end of the market had been affected by the tax hikes. In April last year, the UK introduced a capital-gains tax for overseas property investors, requiring them to pay a percentage of the uplift in a property’s value when they sell.
DMZ think the London market remains highly fragmented as submarkets react differently to domestic and global headwinds. Buyers are waiting for the true impact of Brexit to be understood and the hope is this can be answered swiftly. However, with the continued foreign investment London construction rates should continue to grow allowing middle income families to get themselves on the housing ladder.