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LONDON: Surging demand from investors in Britain means developers are starting to market schemes there ahead of Hong Kong or other destinations.
This reverses a trend of the past 18 months to market British schemes off-plan in Hong Kong, Singapore and on the mainland before Britain.
Liam Bailey, head of residential research at Knight Frank, says demand in Britain has grown strongly this year and he expects more projects to be marketed to British investors first in the coming months.
However, there are still some developers marketing schemes in Hong Kong initially, because buyers in Britain rely on mortgages from British banks, which remain averse to off-plan purchases, he said. Although lending criteria have relaxed slightly in Britain over the past year, it is still easier for a Hong Kong purchaser to get a mortgage on a British property.
Property company Assetz has seen sales of British bricks and mortar double over the past year and forecasts sales will increase by 50% over the next 12 months. Low returns on bonds and bank deposits means British investors are turning to property for higher yields, said the firm's chief executive Stuart Law.
"UK investors with cash earning no interest are ploughing money into buy-to-let," Law said. "Those that were holding out for interest rate rises are now realising that it may be several years before they can get a real return on their cash."
Gross yields of between 4 and 5% are available on London homes. In northern English cities like Leeds, Manchester and Liverpool, yields of 7 to 9% are available, although property there would have lower capital growth than in London.
"Many of our investors are currently looking for new-build apartments in and around city centres," Law said. "Following the recession, there are many opportunities to buy high-quality apartments at discounted prices in areas with high rental demand, a perfect mix for... investors."
More buy-to-let mortgages are becoming available because of the rising demand in Britain, says Mortgages for Business. The number increased 26% in the last quarter compared to the previous three-month period, the broker reports — the third consecutive quarterly rise.
Bailey said investors were taking advantage of low interest rates. For example, the Woolwich, a subsidiary of Barclays Bank, is offering an initial buy-to-let rate of 3.48%.
Although mortgages were becoming more readily available and loan-to-value ratios of 75% were being offered, most British investors were affluent buyers who could release large amounts of equity to make purchases, he said. "Unless you have got a very good track record and are buying in a pukka area, it is not easy to get more than a 50% mortgage at cheap rates."
An Assetz survey shows that 77% of British landlords may add to their portfolios over the next year because of strong rental demand, rising rental values and a belief that sales prices are at or near bottom. Only 10% believed that now is a bad time to invest in British property, citing economic concerns. — SCMP
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