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Asia and Middle East Attracted to London New Builds

By +Eric Jafari

New Build PropertyAsian and Middle Eastern investors are increasingly opting for new build property in London, according to new research from Cluttons.

With demand for rented accommodation increasing in the city, this perhaps comes as little surprise. Private tenancies have increased by 80 per cent in the capital over the last decade and the buy-to-let market will certainly pay dividends for savvy landlords.

However, it isn't just Asian and Middle Eastern buyers that can exploit opportunities in London. There is considerable potential for high returns across the city, particularly with the weak value of the pound making many currency exchange rates favourable. New build rental accommodation can also demand a high premium due to location and quality. Properties are efficient, have lower management costs and can be tailored to individual markets. This makes properties attractive to professionals that are willing to pay much higher rents.

Bill Siegle, senior partner at Cluttons, commented: "Given that the average price of apartments in prime Central London has breached the £1 million mark for the first time, it is ever more important to cater to the growing pool of renters, for whom homeownership in London continues to seem increasingly unlikely, with our forecasts suggesting a 25 per cent surge in capital values over the next five years."

He added that outside of the prime core, higher returns are available and gross yields "are more favourable" in these areas. Consequently, buyers are exploring locations considered to be more secondary. Improved transport links and better value for money are making these areas more viable.

With international residential buyers now capable of capitalising on currency linked savings of approximately 15 per cent for Euro buyers, rising to 33.5 per cent for the Singaporean dollar, London is becoming a magnet for investors. In the Middle East, sterling has also lost its value against the UAE dirham and at the end of Q1 the currency had an exchange discount of 18.5 per cent relative to the market peak. Cluttons isn't confident sterling will strengthen in the near-term either, meaning the capital will continue to be a hot spot for foreign investors.

Nevertheless, the housing shortage in the city means this could become a problem for British-based investors, unable to raise similar capital to their overseas counterparts. Snapping up new-build affordable housing for rental could also reduce the amount of stock available to residential buyers, which will heighten the housing crisis in London.

04 June 2013

Tags

Prime London Property,London Residential Property Construction,London Property Demand