Rich – and naïve – foreigners are being lured to buy new homes in London in a ‘feeding frenzy’, it has been claimed.
Over 60% of London new-builds are being bought by foreigners, with the proportion rising to 88% where the price tag is over £5m.
The properties are bought sight unseen and off-plan, and usually for investment purposes.
Naomi Heaton, who runs the London Central Portfolio Fund, an investment business, said there was a “massive marketing hype” of new homes to the overseas market.
She warned that investors are being poorly advised, while a London MP said that selling developers’ new homes to Asian investors was an ‘insult’ to local people.
Heaton said: “These properties are marketed en-masse at glamorous property exhibitions as speculative investments, particularly targeting unsophisticated buyers in Asia. They are bought off-plan in what can only be described as a feeding frenzy.
“This method of selling negates the hassles of searching and travel, and new-builds also offer modernity which local Asian markets associate with high-end.
“However, chronic oversupply of these new-builds results in dramatically suppressed yields and prices. Canary Wharf has seen 30,000 new units developed since 2000, in stark contrast to the 500 or so units a year in central London. Prices are just one third of those in the heart of the capital and the units have limited resale potential once they are no longer new and the Asian buyer has moved on to the next marketing phenomenon.”
She warned: “Investors are paying a premium for newness, which by implication has built in obsolescence. At resale, units in big schemes can only compete on price.
“The rush of identical properties coming on to the market for rental also means that landlords are all vying for tenants at the same time, with a resultant downward pressure on rents.”
Meanwhile Lib Dem MP Simon Hughes said that selling properties in a regeneration scheme at Elephant & Castle to rich Asian buyers insulted the local people.
Developers of the Heygate Estate have replaced what was council housing with flats, being marketed for sale in the Far East by Colliers International on behalf of developers Lend Lease.
The properties are being sold off-plan from £310,000 for a one-bedroom flat. They will not be completed until 2015.
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Comments
Sounds like Brits buying in France and Spain, same greed, then the bubble burst before it get going! That said, no one protected 1000s of Brits did they?
We supported a developer on an overseas exhibition for a scheme in Kent. We were requested to attend as an independent Lettings expert to provide detailed information to the investors.
Thus far the purchasers have been rewarded with increasing yields and a good chance of some capital appreciation over the next ten years.
The problem is that many overseas investors only want to purchase in prime central London and the prices are staggering. Agents are falling over themselves to offer great yields that cannot be substantiated by comparable schemes. Any agent trying to apply some realism to values will see developers simply switch to an alternative agent prepared to offer more.
If you wonder how the agents cover themselves, it's simply by building in a natural increase in the rental values during the period of the build. EG "well the rent may only x right now but the build will take two years to complete by which time the rent will be y"
There will be tough times ahead for many of these investors, particularly if the build to rent plans proceed.
Im sure ''Rich – and naïve – foreigners'' will do their research into the market before parting with money. If not, then they must have plenty of money and this point is not an issue for them. im sure they are aware of what they want and what they can afford.