London’s property market continues to remain one of the preferred destinations for wealthy Indians. The latest report by Knight Frank, titled ‘London Super-Prime Sales Market Insight-Winter 2019’ shows a 11% year-on-year increase in the number of Indian home buyers in prime London markets, in the 12 months to June 2019. The main areas of interest for Indian home buyers are: Mayfair, Belgravia, Hyde Park, Marylebone and St John’s Wood. An effective discount of about 20%, taking into account the currency and price movements in prime central London, in the period between the EU referendum and October 2019, has benefitted Indian buyers, the report says.
The report highlights that the profile of wealthy Indian buyers is becoming younger, with these investors keen to spend time in other areas of the world including London. The average age of super-prime buyers in London is falling, with some 73% of super-prime buyers below 50, in the year to September 2019, which was up from less than half at the start of 2015. According to the Knight Frank Wealth Report 2019, 21% of Indian UHNWIs showed affinity towards purchasing homes outside of their domicile country, out of which 79% were looking to make property investments in the United Kingdom (UK), higher than both, the Asian and global average.
Shishir Baijal, chairman and managing director of Knight Frank India, said, “London has always been a hotspot for Indian investors, due to its economic and political importance. Despite the recent political and economic developments, the long-term economic fundamentals for the market have remained strong and is, therefore, continuing to generate interest amongst Indians looking to purchase properties outside of the country. When compared to investments in Indian markets, the yields for both, capital and rental, are higher. As the domestic economy hits a slow block, we can expect Indians to continue the momentum of investments in a mature market such as London that offers higher returns and relatively shorter hold period.”
Comparative analysis of regions where Asian, Indian and global UHNWI are looking to invest
|Australia||United States||United Kingdom||Canada||Singapore|
Source: The Wealth Report Attitudes Survey 2019
Brexit-related political uncertainty is the primary reason, however, that some buyers and vendors are still hesitating, the London Super-Prime Sales report said, adding that once the political uncertainty recedes, the level of pent-up demand that has formed in recent years is likely to start moving and suggests that the conditions are in place, for an increase in trading activity.
Alasdair Pritchard, Knight Frank Private Office and Knight Frank’s ambassador to India, said, “London will always remain an interesting market for wealthy Indian buyers. Many have an affinity to it – enjoying the history, the culture and lifestyle on offer. A large number also send their children to the UK, to be educated, investing in property at the same time. With Indian capital flow restrictions in place, many are limited to spending half of what their appetite would have been previously but despite this, in the 12 months to June 2019, we have seen an increase of 11% in the number of Indian buyers purchasing properties in the prime London market, compared to the previous 12 months. The areas of particular interest to these buyers include Mayfair, Belgravia, Hyde Park, Marylebone and St John’s Wood. A key trend we are seeing amongst Indian purchasers is that there is a younger generation of investors coming through – younger generations of wealthy families, who are keen to spend time in other areas of the world including London, the US and Dubai.”
In terms of super-prime properties, or homes priced above £10 million, global buyers spent a total of £2.06 billion in London in the year to May 2019, marginally higher than a figure of £2.05 billion in the previous 12 months, as high net-worth individuals take advantage of the weak pound. While this underlines the resilience of demand against an uncertain political backdrop, overall transaction volumes fell by 13% to 104 from 120, the report said.
London real estate has potential to flourish, post-Brexit
Despite the uncertainty surrounding Brexit, London’s property market has witnessed significant capital inflows and is likely to remain high on the list of China and Hong Kong-based investors, says a report by Knight Frank
February 20, 2017: According to Knight Frank’s ‘The London Report – 2017’, the central London property market has witnessed significant capital inflows since the Brexit referendum, despite an initial pause for breath. For London real estate, the shift towards a wider world of occupiers and investment capital, is at an advanced stage. Last year, 73% of the transactions involved an overseas buyer (source: Knight Frank), compared to 65% in Singapore, 40% in New York and 33% in Paris (source: Real Capital Analytics).
- 80% of overseas capital invested in central London offices originated from outside Europe.
- China and Hong Kong accounted for the largest overseas investment into central London office space.
A key theme for the market over the last few years, has been the rise of the Chinese buyer, whose overseas investment appetite has grown exponentially. While capital controls have been put in place in China to control outflows, the report says that Chinese investment into London is likely to continue in 2017, although it may slow down, as overseas reserves are depleted and mechanisms of getting capital out of the country are restricted.
Nicholas Holt, head of research, Asia-Pacific, Knight Frank Asia-Pacific, says, “Appetite for London commercial property from China and Hong Kong-based investors remains strong. Indeed, the currency advantage that resulted from the outcome of the referendum, has made the UK even more attractive to these buyers. Looking forward, given the continued drive for diversification, we expect the UK’s capital, which boasts strong liquidity and a robust economy, to remain high on Chinese and Hong Kong investors’ wish- lists.”
Commercial real estate prevails
London’s success as a business location saw £9.3 billion of overseas money invested in central London offices in 2016, out of which 80% were from outside of Europe. China and Hong Kong were the largest sources of foreign investment, accounting for £2.9 billion or 31.2% of total overseas investment, while investment arising out of Asia-Pacific made up £1.0 billion or 10.8% of total overseas investment.
Office take-up in central London for the final quarter of 2016 totalled 3.6 million sq ft, the highest since Q3 2015 and 14% above the long-term average, driven by strong activity across the whole market. Seven of the 10 largest occupier deals in 2016, were to overseas corporations, particularly from North America, which is the same as in 2015.
John Snow, head of commercial, Knight Frank, comments, “In 2017, central London will see international money diversify further, thanks to the fall in the pound’s value, widening the range of buyers in the market and further reducing the importance of the EU as a source of funds. This pattern will play out in other parts of the London economy, given that tech has always been US-biased and finance historically traded across the time zones. A new growth pattern for the London economy has already emerged and will now gain momentum, which harks back to its day as the hub of the Commonwealth trade system. The new model is closely entwined with North America and Asia-Pacific, built around common ground on language, law and business practice. Within this new system, London has a Switzerland-like role, as a safe haven to park money as an insurance policy against the unforeseen.”
Stephen Clifton, head of central London offices, Knight Frank, comments, “A wall of overseas money is migrating towards London in 2017. The main problem facing investors, will be sourcing stock. Overall, we enter 2017 with less certainty than many of us would like, or are used to. However, the fundamentals of the London office market are strong. In the leasing market, the tech firms have shrugged off Brexit and are taking space. In the investment market, overseas investors are showing a strong appetite for London offices. We view 2017 as a year that will surprise on the upside.”