Asian investors buying a fifth of central London's new properties

KUALA LUMPUR: Asian investors now account for 49% of all investment purchases in central London, buying more than a fifth of central London's new properties, compared to only 36% purchased by UK investors, according to a new international investment report by Knight Frank on Tuesday, June 22.

“The revival of international investment demand for new-build property has been one of the most remarkable featured of the residential market over the past 18 months. While the market has returned to life, after it pretty much shut down in 2008, current international investment demand is almost totally concentrated on London and is primarily coming from Asia.

Fourty-nine percent of all investors in the 12 months to March 2010 were Asian – 11% were from China or Hong Kong, 10% from Singapore and 7% from Malaysia. Knight Frank estimates that over the 12 months, the total volume of Asian investment has totalled ?761 million (RM3.6 billion),” Knight Frank's head of residential research Liam Bailey said on May 22.

Bailey said the weaker pound has created a compelling buying opportunity for Asian investors and while there are a number of reasons for them to buy properties in the UK, in almost all cases, the investors are looking for a secure return on their investment.

“Rents in London have been rising since June last year and high demand has meant lower void periods. The problem for buyers looking to secure stronger investment yields has been that capital growth has outstripped rental growth in the past year and yields are being squeezed further.

"A gross yield of above 5% for new build properties in a good location is rare,” he said.

Education in the UK is also encouraging inward investment into London, Bailey said, with a rise of 175% of Asian students studying in the UK universities over the past decade.

Sebastian Warner of Knight Frank’s residential investment team said Asian investors focus on good location and generally demand that they are very close to a tube station: “The prospect of a new underground station can attract investors to previously less fashionable postcodes. Many foreign investors have bought into the regeneration of Dalston, and the East London line extension. They also like to purchase near well-known landmarks such as St Paul’s Cathedral, The City or the River Thames.”

Warner said that in the past 12 months, Knight Frank has seen a change in buyer power with Asian buyers looking at more up-market quality product. “In 2007, exhibitions in Asia were focused on smaller affordable units but now demand is for more spacious one of two bedroom apartments from ?400,000 to ?800,000 and more.

“Canary Wharf is now established as one of London’s main locations for residential investment. Pan Peninsula, one of the tallest residential developments in Europe located close to Canary Wharf’s hub, has been incredibly popular with investors in the Far East.

:It has been one of the most successful campaigns ever in Hong Kong and Singapore, with 110 units selling at prices from £250,000 to £4million. Sales were at an average of £800 per square foot,” Warner said.