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Kensington and Chelsea tipped to lead UK property market in 2022 as overseas buyers return to London

The return of overseas buyers means expensive central London houses should lead the British property market next year when it comes to price growth, according to estate agent Winkworth.

Prime London real estate suffered during the pandemic as overseas buyers fled and some Londoners moved out of the capital. But international buyers are now returning, with booming demand in areas like Kensington and Chelsea.

Winkworth Chief Executive Dominic Agace said demand for prime central London properties was up 44% on pre-pandemic levels in the last quarter, compared to just 4% for suburban properties.

Agace said on the company’s podcast: “We will see the return of prime central London. It has been most affected by the pandemic and it hasn’t gone anywhere for the past six years. There will be significant pick up.

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“We are likely to see six to seven per cent growth next year. The country markets will continue at a lower rate, driven by a lack of supply, at around four to five per cent, with suburban London staying steady at three to four per cent, apart from the super suburbs that generally outperform.”

House prices have been rocketing during the pandemic as people search for bigger properties to accommodate the shift to working from home. Supply has failed to keep up with demand.

Prime properties in central London boroughs like Camden and Kensington have failed to keep pace with national price growth but the market is starting to pick up.

Last month estate agent Knight Frank said prime central London prices had risen by 1.1% so far this year thanks to the return of rich international buyers. Prices have risen consecutively for the last six month — the first time that has happened since before the Brexit referendum.

By Oscar Williams-Grut

Source: Evening Standard

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More Overseas Buyers Eye UK Property Market

With increasing numbers of overseas buyers looking toward UK property, we look at the reasons for this rise and where to look.

Increasingly, UK expats and foreign nationals have been looking towards UK property for investment purposes. Those living and working in the US, Canada and the Far East are facing strong investment prospects, emboldened by a weaker pound, the availability of foreign national mortgages, confidence in the UK housing market and economy more generally, and a vaccine programme that promises to keep foreign travel a distinct possibility.

What We’re Seeing – UK Expats and Foreign Nationals Look to UK Property.

‘The number of UK expat and foreign nationals buying in the UK with the help of UK expat and foreign national mortgages was incredible over the course of the pandemic’ says Stuart Marshall. ‘But there’s no sign of that slowing down in our new post-pandemic world either. Anecdotally, we’ve seen a huge surge in the numbers of enquiries talking about obtaining a UK mortgage while being paid in a non-sterling currency. As restrictions have eased, we’ve seen a proportional rise in enquiries for UK mortgages coming from UK expat and foreign national investors. And many of these are looking at around the £500,000 mark, indicating that investing in the UK property market is no longer just for the super-rich working overseas. Further, entry-level investors are also increasing their volume of enquiries in a bid to get a slice of the lucrative UK investment market.’

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There are many interesting things to note when looking at the enquiries we’re receiving. First off, investment in the UK property market remains strong from the Far East. This is no doubt due, in part, to the UK’s BNO passport scheme in Hong Kong, which is continuing to contribute to the steady stream of foreign investment in the UK. New build properties are also a popular choice with UK expat and foreign national investors at the minute as they try to bypass supply issues and capitalise on the cheaper cost of newbuilds. Another factor to note is that investors are seeing the opportunity presented by city centre flats. While these types of property are not as popular as they once were in the property market, they are growing in popularity again in a rental market which is struggling for stock. The more affordable cost of these properties coupled with the rising rental cost is the perfect combination for a quality investment using a UK expat or foreign national mortgage.

Lastly, London continues to maintain popularity with overseas buyers, with lower prices in the capital proving to be an incentive for foreign investment. Prices are once again rising in the capital and so is rental growth, meaning that it’s an excellent time for UK expat and foreign national investors to buy an investment property in London.

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London.

After the terrible effect of the pandemic on London’s rental market, prospects are starting to look up for UK expat and foreign national buy-to-let investors looking to the capital. ‘As we’ve said, many of the enquiries we’re getting are about London property. It’s a tried and tested route for many UK expats and foreign nationals and somewhere they’re familiar with. The pandemic has affected rental stock massively, with 57% fewer homes available to rent in the capital in August 2020 compared to the previous year. This lack of available homes is putting upwards pressure on rental prices with London rents predicted to recover to their pre-pandemic level by the middle of 2022.’

‘Crucially for UK expat and foreign national investors, the sales market in London remains inviting, with prices far lower than you would typically expect in the capital market. There were 14% fewer people looking to buy in London in August 2021 compared to in 2019’s pre-pandemic market. This is contributing to a stock increase in properties for sale in the capital (19% higher in 2021 compared to the same time in 2019). This stock surplus is making sure that prices stay low – a great thing for UK expat and foreign national investors looking to capitalise on the rising rents by using a UK expat or foreign national mortgage.’

North West.

‘The North West is another area that we recommend to many UK expat and foreign national investors looking to buy in the UK. For those that are unsure about where to buy, the North West presents a proposition that’s hard to resist.’

One area in the North West that is of particular interest is Manchester. In recent studies, it’s been found that the number of properties available to rent in Manchester has fallen below 500. For a population of 500,000, this means that securing a rental property is incredibly competitive – a good thing for UK expat and foreign national investors who own a rental property in Manchester. As a consequence of the low stock, properties in Manchester are renting thick and fast. In the third quarter of 2021, there were more than 2750 lettings agreed in Manchester, 10.3% higher than we saw in the same period of 2019.

‘There is a great opportunity for UK expat and foreign national investors in Manchester at the minute. Zoopla is reporting that the average rental price in Manchester city centre currently sits at £1,505pcm, around £500 higher than the UK average. Average rents for studio and two-bed apartments have risen 6% in the last 3 months as a result of the constraint on supply. The average rental yield in Manchester now sits at 8.55%, more than double the UK average.’

The figures in Manchester speak for themselves so it’s no surprise that many UK expats and foreign nationals are making enquiries about mortgages for properties in Manchester and the rest of the North West. With so many UK expats and foreign nationals looking to invest in the UK with a UK expat or foreign national mortgage at the moment, it’s important to be aware of the areas that are most in demand in order to maximise the profitability of your investment and ensure financial stability for years to come.

Source: EIN News

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The opportunity in the changing nature of overseas landlords

There is a new wave of overseas investors looking to buy into the UK rental market. We are seeing an emerging trend of moderately wealthy individuals who are looking for a relatively safe place to invest with a strong currency.

These are not the Pandoras Papers billionaires looking to hide cash in premium property, these people can only buy with a mortgage and even then, they need a tenant to pay rent to cover the cost of borrowing.

These new investors are similar to smaller UK landlords and are filling a gap in the private rental sector being left by a fall in domestic landlords.

The new overseas buyers look for somewhere safe to put their money that will produce sufficient income to cover their investment. Developers know this and this demand is underpinning the viability of larger and more impressive schemes. These developments boast top quality leisure facilities, hotel style concierge services and unrivalled communal areas.

This creates opportunities for British young professionals to rent quality accommodation and for UK management companies to let and manage the units on behalf of these investors. Developers are creating quality accommodation in city hubs such as Manchester and Leeds, knowing that many buyers will be investor landlords who will rent them out to the local population. This works well for the local area as the properties are filled quickly and the residents can engage with and be part of the community.

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However, these more modest investors need a mortgage in order to buy, which creates an opportunity for the mortgage finance market. There are very few lenders in the UK who have expertise in dealing with overseas buyers like this, with BC Invest being one of them. It is important to work with a specialist who can help smooth the borrower journey and deliver swiftly – for example committing to providing a loan offer within seven days of payment.

There is an opportunity here for the mortgage broking community to tap into this growing client base and advise foreign buyers on UK buy-to-let mortgages. They will need your advice, as this is a complex area and there are few products available.

In our own experience, we find that these clients make good credit-worthy borrowers but have difficulty accessing property finance due to their non-resident status. We see a growing demand from our developer relationships to have funding for their buyers, which we can provide, but there is an advice gap in this space.

Many lenders will support applications from expatriates who hold a UK passport with a UK bank account. It is a completely different ballgame with genuinely overseas investors when this may be their first significant transaction in the UK with no financial footprint here. Getting a UK bank account can be nigh on impossible and proving income can be challenging.

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This is why we work with a network of experienced brokers who have identified the opportunity within this space. UK property transactions can be incredibly opaque and frustrating at times, even when you have grown up here,. Whilst we may take our understanding of the legal system for granted it is not always user friendly and can be a worryingly slow process for international buyers used to immediacy of information. This is why the broker plays such a crucial role in the process and the efforts of these brokers to translate and smooth the process is hugely appreciated.

This year has demonstrated the resilience of the residential property market against a backdrop of economic uncertainty. Transaction volumes have at times hit record amounts and despite increase taxation, the international investor appetite has remained unwavering. We believe this international demand is set to grow and hence the demand for financial advice and support in these transactions will increase too.

Together we believe we are forging strong partnerships to support a challenging but rewarding market in a space where domestic landlords are scaling back. Providing transparency to an extremely opaque environment will allow the property market to continue to expand and the quality properties for the domestic rental occupiers will continue to improve.

By Richard Boyle

Source: Mortgage Strategy

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Overseas investors snapping up UK property investments

Wealthy overseas investors are still honing in on the UK property market as a key investment location, with Hong Kong buyers leading the trend.

Property investors based abroad are continuing to see the benefits of the UK housing market as a “safe haven“. New data based on HM Land Registry statistics shows that foreign ownership of UK property has gone up by around 180% in 11 years. Furthermore, it found that almost a quarter of a million homes were registered to buyers with a correspondence address abroad in August.

The research also shows that more of these overseas investors are individuals rather than companies. The buyers were spread over 20 different countries, with Jersey, Guernsey, Isle of Man, British Virgin Islands, south-east Asia and the Middle East all top locations for foreign investors.

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Hong Kongers still investing in UK

The UK housing sector has long since been a popular option among Hong Kong residents looking for investments abroad. The latest statistics show that the biggest spenders in UK property from overseas are from Hong Kong, purchasing more than 21,300 homes since 2010. In August, a total of 51,866 property titles were registered to those with addresses in the region.

Since the recent changes to the UK BNO visa, there has been more interest from overseas investors from Hong Kong seeking property in this country. The new system gives nationals more opportunities to live and work here, as they can apply for two periods of five years to stay in the UK. For many, this makes purchasing property in the country even more appealing.

Favourable exchange rates are another attraction for investing in UK property right now.

Stephen Ludlow, chairman at Ludlow Thompson, said earlier this year: “Fears that Brexit might dampen the appeal of UK property amongst overseas investors have been unfounded, with the number of overseas landlords reaching a record high.

“Many canny investors took advantage of the temporary drop in Sterling’s value to purchase properties in the UK and benefited from both an increase in property prices and a recovery in sterling.”

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Which areas are overseas investors targeting?

According to the Centre For Public Data (CFPData), who compiled the research from HM Land Registry, more investors than ever are branching out from the traditional London market. While a decade or more ago, London was the go-to spot for a lot of foreign investment, many are seeing the value of backing new areas elsewhere.

The data shows that, in particular, Liverpool, Manchester, Salford and Leeds are attracting bigger numbers of overseas investors now. All of these areas are notable for their regeneration, redevelopment and investment overhauls in recent years, making them a genuinely attractive alternative to pricier London. The CFPData believes most of the foreign investment in these cities is in flats, supporting the thriving rental demand in these areas.

“Rising house prices in the UK are often attributed in part to purchases by overseas buyers. However, gaps in published official data hamper our understanding of such purchases, with previous analysis of the number and effect of overseas buyers being based on small samples or anecdotal reports,” CFPData added.

By Eleanor Harvey

Source: Buy Association

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Overseas buyers return to London with apartments in high demand

Since the first UK national lockdown in March 2019, the presence of overseas buyers in the London market has been severely impacted, however, with the return of international travel, demand is returning to pre-pandemic levels, where two-bedroom apartments are proving most popular.

According to research by London buying agency Astute Property Search, overseas buyers are ‘hedging’ 2021 prices in anticipation of a stronger 2022 market.

Matt Turner, Founder of Astute Property Search, says: “Many of my clients are British expats, with plans to move back to the UK in 3-5 years’ time. They are mainly looking for homes that can double up as rental investments to cover themselves before they’re ready to move back but are essentially buying now to attempt to hedge 2021 prices before the market fully recovers in 2022. In the past few months we have seen a huge rise in enquires from expat couples that are coming over and block booking viewings for properties that fit their profile.

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“One of our best transactions this year was secured in St John’s Wood, for a client based in Europe and looking for a city pied a terre. Due to travel restrictions, they were not able to physically be in the London and “their viewing” was undertaken through video calls. Close to 50 per cent of all apartments in prime central London were sold to international buyers pre-pandemic and it’s this inability to travel that has seen a lull in the market, so having us on hand to verify and negotiate allowed them to secure a fantastic deal.”

Astute Property Search predict that apartments will see a renaissance and an increase in demand will see prices rise sharply 2022, especially for two-bedroom apartments, so now is the time for investors to secure the best deal. Furthermore, the return to offices is predicted to recover the near pre-pandemic levels in 2022, which may lead to some finding their new commute to be too lengthy that will further increase demand for London flats.

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One lasting impact of the recent lockdowns is the increased demand for space, which has seeped from the house market to flats, with overseas buyers seeking value in larger apartments.

Turner adds: “The studio and one-bedroom flat market has dropped significantly and will take the longest to recover, so currently we are encouraging our clients to purchase apartments with a minimum of two bedrooms in locations where value is still there to find.

“Space and square footage are key and I would go further to say that for now two bedroom apartments will be in higher demand from prospective tenants. Working from home has become the norm with tenants sleeping in one bedroom and then using the other as an office. Units with dedicated outside space such as balconies, communal gardens, terraces all carry a premium on the rental market, so are proving popular with international investors looking for strong yields.”

Source: Property Funds World

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London’s luxury hotspots a magnet for property buyers as travel rules ease

A sudden spike in interest in the prime central London property market is being reported by a leading high-end developer, which has seen a dramatic uplift in sales at its showcase luxury development in the UK capital.

Trends that unfolded during the pandemic have seemingly shifted into reverse with the centre of the city re-emerging as a magnet, as investors look to hedge against an expected surge in British inflation.

“If people want to know what’s going on right now in prime central London property, it is chaos”, Gabriel York, the chief executive of luxury developer Lodha UK, tells The National.

“It is selling, and it’s selling fast. We’ve gone from 30 per cent committed to 65 per cent, in just a matter of weeks, and I think it will continue.”

Mr York was referring to sales at No. 1 Grosvenor Square, the company’s flagship luxury development in the heart of Mayfair, just a stone’s throw from Bond Street and Oxford Street’s Selfridges department store.

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With just 44 apartments on offer, the building was formerly the US embassy, with notable ambassador Joseph P Kennedy, the father of JFK himself, a former resident, once installing a replica of the Oval Office in the building. The remnants of that work are now clearly visible in the property’s ornate central lobby.

It later became the Canadian High Commission from 1961 to 2014, until Lodha UK, a subsidiary of India’s Lodha Group, purchased the building for a reported £308 million ($419m) and dismantled it brick by brick, before restoring its facade with the original materials and raising the ceiling height to 4.2 metres to accommodate modern tastes.

The result is a hyper-luxury development with apartments starting from £8.65 million, and luxury additions such as a Residents’ Club & Spa with private gym, swimming pool, spa and cinema, as well as private lifts, a personalised concierge service and a secure private entrance for cars. While the “race for space” has seen many buyers exit London to buy homes outside the UK capital, the developer said the reverse is suddenly true.

Surge in buyers from the GCC

With more homes sold at the development in the past four weeks than in any 12-month period, Mr York says a number of factors have triggered this radical shift in market activity, with one of them a change in the type of buyer.

While the early buyers all lived within 150 metres of the development and included chief executives or chairmen of FTSE 350 companies, 25 per cent of customers heading through the doors over the past six weeks are families from the GCC, “particularly from the UAE”.

“That can be everything from royal families to large business families and trading names,” says Mr York, who noticed a ramp up in interest from the region in September when the UAE and UK signed a Strategic Investment Partnership.

While the most expensive apartment remaining costs £40m, for a five-bedroom home, average deals now hover between £20m and £25m, with 30 per cent of the project now sold and handed over, 20 per cent pending completion and a further 12 to 15 per cent agreed.

The surge in GCC buyers is partly follows the easing of travel restrictions over the summer, says Mr York, but there is also “something different about what our Middle East customers are seeking”.

“Often it’s about a larger family, so we’ve had offers for multiple apartments for different family members, such as brothers wanting to live side by side and parents and children wanting to be close but not together,” he says.

Privacy and security are also very important, with the building’s proximity to the Italian Embassy a plus, along with a covered entrance for cars, with owners’ vehicles parked using “The Vault”, reportedly the largest and fastest automated parking system in the UK.

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The service offering is also key, with services provided by Lodha UK’s private management company Saint Amand, a team of 30 hospitality professionals who not only manage the residence but also make travel arrangements or book shows and restaurants across London.

Rather than tie up with a hotel brand, Lodha UK wanted an offering that worked for residents rather than tourists at both the Grosvenor Square location and Lodha UK’s sister development Lincoln Square, just 10 minutes from St Paul’s Cathedral.

Three apartments sold for £147m in April 2020

While No.1 Grosvenor Square started out as 48 apartments, there are now only 44 after some buyers amalgamated several residences into single homes.

One of the biggest deals started in April 2020 — completing in October last year — just as the pandemic was taking hold, with a penthouse and two apartments purchased for £147m.

The buyer was a UK-based technology entrepreneur who wanted the combined 17,000 square feet of space as his primary home.

“I went to his country home to visit him and said ‘what are you doing buying in central London in the middle of a pandemic when everyone’s moving to the country’,” says Mr York, a former army officer.

“He looked at me and said ‘are you crazy, I can do two days here in the countryside and then I’ve got to be back in London. I’m a city boy’. So the pandemic wasn’t a time to panic because that was a major transaction,” says Mr York.

However, the picture became very bleak towards the end of last year when London entered its third lockdown.

“The market froze for us”, says Mr York. “Across both our projects, in December, January and February the market just went. It was winter and people were locked up.”

Add in Mr York, his chief financial officer and other members of the team contracting Covid-19, and it must have been a challenging time.

However, Mr York describes that period as “dispiriting”, particularly as the slowdown came just after the company had received its first Middle East offer on an apartment in November.

“It was a really big moment and then lockdown swept the legs from under us, so it was a difficult few months not knowing how long it would last for.”

Market has transformed since grinding to a halt in lockdown three

What has happened since April, however, has been “quite extraordinary”, says Mr York.

The change was the emergence of an “entirely new wave of buyers” for Lincoln Square, where prices start at £2m to £3m, with one of the first buyers a doctor based in Devon.

“We started to have more curious cases like this. Normally with central London [the buyer] is going to be in financial services … people in private equity, hedge funds, running banks, and then this doctor bought,” says Mr York.

Soon after, more country dwellers snapped up homes at Lincoln Square, as they looked for a better balance between their rural and city lives.

The shift was far cry from the endless media reports of the “great exodus from London”, says Mr York. Instead people that had lived outside of London for a long time were hunting for a second home to avoid the commute or a hotel stay.

Then, in August and September, sales “ just took off”, with just five apartments of Lincoln Square’s 221 now left, a huge shift from the 65 that were unsold when the company entered the pandemic in March last year.

“In the last three months, the total amount of sales we’ve done across both projects is more than we’ve done in a whole year ever before — so the sales in that period exceed the maximum annual sales we’ve ever done in London,” says Mr York.

House prices in prime central London hit a turning point

For a company that has only been selling since 2016, it shows how quickly the market has shifted away from the suppressed prices seen in the prime central London market in recent years.

Earlier this month, consultancy Savills said prices had finally reached a “turning point”, rising for the first time since September 2014 despite the absence of international buyers.

Easing lockdown restrictions and the return of office workers to the UK capital resulted in annual house price growth of 1.4 per cent in the third quarter, the second three-month period of growth in a row, Savills said, after prices for the central London market bottomed out when international buyers were absent.

However, Mr York has certainly seen a resurgence in overseas buyers, particularly form the GCC, a market the company had barely worked with before.

The change came after Lincoln Square completed and the company noticed a change in the profile of tenants in the building, where rents cost £750 a week for a one bedroom and between £1,000 to £1,500 for a two-bed.

“There were people in their 20s from the GCC, choosing this part of London because they might be studying or at an early stage in their career. In some cases the parents owned somewhere in Knightsbridge,” Mr York says.

Four people from the GCC are currently buying in Lincoln Square, with one buyer purchasing a three- bedroom apartment to visit London and see his children who are at university in central London.

There is also a GCC buyer at Grosvenor Square, where demand has ramped up so much there are now multiple bidders on each apartment — another first for Lodha UK.

If the pace continues, Grosvenor Square could beat its sale completion target in 2024 by 18 months.

Home ownership set to surge over the next 10 years

Looking ahead, Mr York says the market is entering a five- to 10-year period where people are choosing ownership over staying in a hotel or rental to gain back control, in case the government imposes travel restrictions again.

“Ownership levels are going to increase, not just the percentage of people that own a property, but the average number of properties owned per person. And that’s going to happen across all asset classes,” says Mr York, who is a fluent Arabic speaker and plans a series of promotional videos about Grosvenor Square in the language.

“We’re going to see outrageous asset price inflation in holiday destinations and heavily visited cities such as London, Paris and Bangkok,” he adds.

“What we’ve gone through the last couple of months with car prices, gas prices and petrol prices going up as well as lorry drivers being paid more … in six months time it will have gone that way in every asset class category. We are at the cusp of a very high level of inflation and it will be property prices that go up at the fastest rate.”

Lodha UK’s’ next project, Holland Park Gate, will launch within weeks with 71 off-plan apartments. The company is raising capital for a £250m fund after customers asked to invest in future projects, though Lodha UK will be contributing up to 50 per cent of the capital.

While Savills is expecting 25 per cent growth in prime central London over the next five years Mr York says once you build in the inflation, that growth will “considerably higher”.

“If we are going into a higher inflation environment then I would not be surprised if it’s probably somewhere between 30 and 60 per cent,” he says.

“Has everybody been chasing central London property in the last six months? No, absolutely not. But right now they are. The people buying at the moment are getting ahead and positioning themselves as early as they can.”

By Alice Haine

Source: The National News

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Major overseas investor shifts to long-term lettings from short-lets

A lettings agency with links to Saudi Arabian investors has produced a case study of how faith is returning to the long term lettings sector after the worries of the pandemic.

London and Manchester agency Orlando Reid cites one Saudi Arabian client, for whom they manage 26 properties in apartment blocks located in Belgravia and Knightsbridge.

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The prime central London portfolio ranges from one bedroom flats of 431 square feet to three bedroom apartments boasting 2,250 square feet, and with rental values starting at £2,100 pcm up to £8,000 pcm.

Orlando Reid managing director Baljit Arora comments: “Our investor client has recently moved his entire rental portfolio, located in Lyall Street, Lower Belgrave Street and Hans Place SW1, from short to long term lets.

“Having experienced unprecedented void periods during the pandemic from offering only short term lets, a switch to long term rental makes a lot of sense. The long term rental market has come back fighting and demand is consistent with the summer 2020 market.”

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Arora says that as travel restrictions have started to shift, London is welcoming back wealthy overseas students to attend universities, which is driving up rental property prices across prime central London.

This, along with more people returning to live and work in the city, is increasing demand across the rental sector, he says.

By Graham Norwood

Source: Letting Agent Today

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New UK Expat Buy-to-Let Investors to Profit from the City Centre

After last year’s depressed city centre rental market, city centre rents are steadily rising again. This trend is of particular interest to new UK expat buy-to-let investors, who are now starting to see the value to be had from city centre investments, whether off-plan or on a resale property.

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Pandemic Life Vs The ‘New Normal’.

‘What the pandemic created’ says Stuart Marshall ‘is a whole wave of people looking to move away from the city centre. During lockdowns where people were confined to their homes, the city centre lost out to rural and suburban areas as people searched out more space and proximity to green spaces. Consequently, the price of properties in the city centre fell a little in value, whilst rents also suffered from the falling demand. However, what this fall in cost has created is an opportunity for those UK expat and foreign national investors who recognise that normal life will eventually return to city centres – and in a big way. Along with the range of UK expat mortgages available to UK expats, city centre property is a very good way of entering the UK property market. Now that life is approaching the ‘new normal’, city centres are regaining some appeal. Their vibrant social scenes proving enticing for those who have been deprived for over a year. Workplaces are also welcoming back their staff for at least part of the working week, incentivising workers to move back to the city to avoid long commutes from the suburbs.’

How is the Rental Market Affected?

These changes are translating directly to the rental market and yields have risen because of a fall in the cost of city centre property and a subsequent rental recovery. For investors who bought in a city centre this year, the average gross yield has risen to 5.3% – up from 4.7% in 2020.

London.

‘London was of particular interest during the height of the pandemic. In effect a two-speed market came into being – with London growing negatively compared to the rest of the country. This was also true of London’s rental market. However, we did also note that the fall in the value of London property did present an opportunity for UK expat and foreign national investors looking to invest in the capital. Now that opportunity is beginning to manifest itself in the rental yields that investors are seeing. 35% of investors who purchased in London this year are reaping yields of over 5%, up from 30% in 2020. With prices still somewhat depressed, UK expats can still profit from a rental recovery in the capital. Rents fell to their lowest in London in April 2021, when they were 20.4% lower than the same time in 2020. However, by June rents had recovered slightly and were only 16.5% lower than the same time in the previous year. This upwards trajectory in rents points to a profitable future in the city for those UK expat investors canny enough to invest.’

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Across the Rest of the UK.

London is not the only area that is growing. The rest of the UK’s cities are also seeing growth similar to pre-pandemic levels. For new buy-to-let investors in cities outside of the capital, the average yield has risen to 6.2% from 5.9%. ‘And the future looks bright’ says Stuart Marshall, ‘with average gross yields in cities outside the capital at their highest level since 2016.’

New UK Expat Buy-to-Let Investors Take Note.

While cities are performing strongly, the areas outside of city centres have waned sightly as a result. New buy-to-let investors in areas outside of the city centre are also seeing 6.2% yields. However, this is down from 6.4% in 2020. Property is also more expensive in these areas with city centres still offering great bargains for savvy UK expat and foreign national investors, especially those who have access to some of the great funding deals available.

‘Expense and accessibility are the main thing for UK expat investors’ advises Stuart Marshall. ‘With Zoopla reporting that the average cost of a house has risen by 7.3% in the last year, desirable houses – typically a three-bed suburban family home – are getting harder to justify as an investment property. On the other hand, flats – typically in the city centre – have only risen by 1.4%. With many options available for flats including new build, re-sale and off-plan developments, city centre flats are a great choice for first-time UK expat investors. The lower cost of such properties only contributes to an easier investment and higher rental yields – especially as a return to pre-pandemic rental growth is on the horizon.’

Rental growth in the city is expected to continue to strengthen too. With the steep rise in property prices, prospective buyers are stuck in the rental market as they are unable to afford their own house. This shift means renting has become cheaper than buying and is the only option for many. Further, younger people are favouring renting in city areas to facilitate a strong social lifestyle revolving around clubs, bars, restaurants, live music, and many other attractions. Younger people are also living more fluidly, more willing to move, travel and change jobs, which is leading to a whole generation choosing to rent to avoid being ‘tied down’ with a mortgage.

Where to Look.

It goes without saying that city centre flats will be the properties of interest for new UK expat investors. They are affordable and there is good stock availability, along with good access to UK expat mortgages to allow funding of most property purchases. Further, they are currently being snapped up quickly in the rental market. However, the question remains where to invest. There is great regional variation in the price growth for flats and this will help to decide where to invest. The major UK cities are always a good place to start as they perform consistently well with rental yields and capital growth in those areas will contribute to the long-term profitability of the investment. In Wales, price growth for flats is only up by 0.9%, which presents an excellent opportunity for UK expats looking to invest – with Wales highlighted as a serious growth market in the near future. Other areas of interest are the North West, home to two of the most popular rental cities – Manchester and Liverpool – where price growth for flats is up only 3.4%.

Meanwhile, as noted above, London is in the midst of a rental recovery. However, price growth for flats in the capital is down by 0.5% – so London could present one of the best opportunities for UK expats looking to invest.

Source: EIN News

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Prime outer London premium property prices set the pace in 2021

A forecast made on Tuesday by estate agents Knight Frank suggests that property prices in prime outer London will grow by nearly 4 per cent over the rest of 2021, double the rate of prices in prime central London.

This trend is partly driven by the return of overseas buyers to the London property scene who have traditionally invested in more central areas.

It may defy precedent, but is not predicted to be a pandemic-induced one-off. Knight Frank’s five-year forecast shows growth in prime outer London will remain steady at between 4 and 5 per cent.

“Prime outer London” is defined by Knight Frank as covering Barnes, Battersea, Canary Wharf, Chiswick, Clapham, Fulham, Hampstead, Richmond and Riverside.

By contrast, prime central London spans the City of Westminster and the Royal Borough of Kensington and Chelsea, and parts of the boroughs of Hammersmith and Fulham, and Camden.

There had been little in the data to foreshadow this sudden growth, said Henry Faun, partner at Knight Frank Middle East.

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“There were some spikes in the market back in 2016 revolving around the EU referendum and Brexit, but since then things have been relatively steady,” he said. “The fluctuations were more in 2020 during lockdown.”

The same applies to offers accepted which, like prime prices, have gradually increased since March last year when the pandemic was declared, upending markets around the globe.

Yet the steady recovery from 2020’s initial Covid-induced shock has morphed into the “most active point in the market at any one time in the last five years”, said Mr Faun.

With many overseas buyers unable to fly to London owing to pandemic restrictions, domestic buyers have sustained the market for the past 18 months.

These buyers have acted like a centrifugal force, stretching London prime out of its traditional home within the SW1 postcode, and into areas of east and outer London not traditionally viewed as premium.

“A very large proportion of the prime central areas, those around Hyde Park, for example, do rely on overseas buyers,” said Mr Faun.

Their absence, along with the newly beefed up pound, has kept prices in and around Hyde Park “in check”.

Overseas buyers looking to London outer prime

The heat of pent-up overseas demand is now starting to be felt, however, and the inquiries aren’t solely about prime central London.

The trend was highlighted by Stuart Leslie, international sales and marketing director at property developer Barratt London.

“We have seen a lot of interest in east London, particularly from young professionals, in Canary Wharf – wanting to have a little bit better value for money than they will be getting in the west [of London] – and that value proposition has brought over [international] investors as well,” he said.

“So, whereas three or four years ago we wouldn’t have necessarily seen people from the Middle East investing in east London, now we’re seeing quite regularly both individuals and even family offices and institutional investments looking for real value for money and that strong rental demand, which is really driving the good rental yields” in the area.

Wherever this demand is focused, it is welcomed by Mr Faun, whose team has been increasingly busy.

“Prospective Middle Eastern buyers coming into the market are picking up the phone and sending through web inquiries or perhaps speaking with myself or the team in the Dubai office and saying: ‘We’re looking at buying real estate in London. Can you help us?’”

By Tim Kiek

Source: The National News

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UK Expat Buy-to-Let Investors Look North

In the search for higher returns, UK expat buy-to-let investors need to look beyond the capital to offset the impact of profit-eroding legislation.

Buy-to-let UK property has long been seen as a lucrative investment, often used to provide an inheritance for the investor’s children, as a pension alternative, or as an ancillary form of income. Buy-to-let investors are looking North. And UK expat buy-to-let investors need to be looking North too! There’s also been a clear growth in the number of buy-to-let landlords operating as a limited company compared to last year.

According to research from the BVA BDRC Landlord Panel for Q1 2021, this is the first time in over 4 years that a higher proportion of landlords are intending to expand their portfolio rather than reduce it (19% vs. 17%). The same research has also shown that 61% of landlords plan to use a buy-to-let mortgage to fund their next purchase and 29% of buy-to-let borrowers intend to remortgage in the next 12 months.

The Need for Higher Returns.

Due to legislative tax changes in the last few years, landlords are having to seek out areas that offer higher returns. In 2016, a 3% stamp duty surcharge was introduced for the purchase of second homes. In April 2020, it was announced that landlords could no longer claim mortgage interest as a tax expense. These changes have slowly eroded some of the profitability for UK expat and foreign national landlords. Despite this, landlord optimism in the near-term prospects for capital gains and rental yields has significantly increased year-on-year, by 26% and 24% respectively.

Landlords operating in London are most likely to have seen a fall in tenant demand in Q1 2020 and Q1 2021. So, where are UK expats and foreign national property buyers now looking? The answer is in so called ‘UK hotspots’ where higher returns offset the impact of the changing legislation and price entry points are a lot lower than some of the more traditional buy-to-let property areas.

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London Investors Looking Outside the Capital.

Between January and July 2021, 12% of UK property purchases were by investors. This was the highest since 2016 and is testament to the strength of UK property investment. ‘As a UK expat or overseas investor, it’s vital to see where investments are being made’ says Stuart Marshall. ‘Keeping track of these trends will help you to recognise where the most profitable areas will be when looking to invest.’

So, where should potential UK expat and overseas buy-to-let investors keep an eye on?

‘What’s really interesting to see’, continues Stuart Marshall, ‘is where the capital’s property investors are putting their money. 63% of homes bought by London-based property investors in 2021 have been bought outside the capital. This figure has been steadily rising for years – more than doubling from the 26% we saw ten years ago in 2011. The main driver for buying outside of London is obvious – the returns are higher elsewhere!’

Although a rental recovery is happening in the capital, it’s not enough to keep London-based investors there. Only 35% of investors who bought in London this year are seeing rental yields above 5%. Further, as of June 2021, rents in London were 16.5% lower than the same time a year ago, meaning investors who purchase in the capital are losing out on rental earnings. Though this has recovered from the 20.4% depression that we were seeing in April, it’s still not enough to keep UK expat and foreign national investors from looking elsewhere. For example, the average yield in cities across the rest of the UK is 6.2%. This figure is also the same for the average rental yield in areas outside of cities across the UK. So, London is falling far behind other areas of the UK and it’s forcing UK expat and foreign national investors to look elsewhere in the search for higher returns.

Where to Look for UK Expat and Foreign National Investors.

One area of interest, particularly when charting the behaviour of capital-based investors, is the North East. Here, landlords were responsible for almost a quarter of all purchases between January and July this year. ‘Both rental yields and capital growth in London are being far surpassed by Northern regions. And, increasingly, London’s investors are looking toward these areas for greater returns. For UK expats and foreign nationals looking to invest, taking note of this trend is important as it’s a strong indicator for where the best rental yields are going to be found. For example, in Middlesbrough and County Durham, London’s investors bought 28% and 25% of properties sold respectively in those areas in the last year. It’s clear to see why these areas have garnered such recent popularity with Middlesbrough and County Durham earning yields of 9.2% and 9.6% respectively.’

North West.

The North West continues to perform strongly when it comes to buy-to-let property investment. Though the average rental yield in the North West is currently lower than the North East – 7.8% compared to 9.1% – the North West is still a consistent favourite for UK expat and foreign national investors. ‘This may be to do with the incredible regional growth that we see in the North West’ muses Stuart Marshall. ‘In fact, the North West has the highest level of regional growth of anywhere in the UK. Regional growth in the last year has reached almost 12% in the North West, compared to the North East’s 9%. So, many UK expat and foreign national investors are favouring the North West because, in effect, you’re earning twice on your investment – once from the rental yield and once from the capital growth. As always, the best thing to do when looking to take out a UK expat buy-to-let mortgage is to talk to a specialist who can help to point you in the right direction and navigate some of the pitfalls.’

Source: EIN News

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