Trevor Garrood Partner
London real estate market still attractive to overseas investors following Brexit
Overseas clients, especially from China, the wider Asia Pacific region and Russia, are increasingly taking the opportunity to invest in high quality property in London and locations within easy reach of the capital.
Following Brexit, we have seen an increase in investment from overseas investors looking to invest in what they see as a discounted market helped by the drop in the value of the pound.
Housing demand currently outstrips supply so investment in the residential property market is likely to continue to be an active market. Furthermore, one of the key motivations for an investor (particularly Chinese investors) is the UK's reputation for being a leader in higher education. 50% of enquiries from Chinese investors to estate agents such as Savills and Foxtons come from parents who are based in China but want to send their son or daughter across to the UK to obtain a degree from a reputable university. This, combined with the housing shortage in London, indicates the majority of Chinese investors will take a long term view on investment into the UK.
Recent press releases have revealed the extent of the concern in the market at the perceived risk of falling property values and this has been highlighted by six property funds suspending trading, totalling approximately £18bn worth of investments. However, we have seen an increase in interest and activity particularly from foreign investors. By way of example, Property Week reported that private Middle Eastern investors have exchanged on a deal for 5 King William Street, London (the home of Japanese Investment Bank Daiwa Capital Markets) for around £90m.
In an uncertain world, prime property in London and south east England is perceived as a relatively safe asset class. Points in its favour include:
> Certainty as to ownership: title is effectively state guaranteed and disputes as to ownership are rare.
> Ease of entry to the market: there are no restrictions on foreign corporations or individuals owning real estate, unlike certain other jurisdictions.
> Favourable tax treatment for overseas investors.
> Flexibility: property can be acquired and held either as a stand alone asset or as part of the business assets of a company or other corporate vehicle.
> The “full repairing and insuring” lease model for commercial property. Broadly, English commercial leases are structured so that the tenants pay maintenance and running costs, leaving the rent as pure income in the hands of the landlord.
The Ince & Co real estate team in London has recently advised clients from China, Russia,Turkey, Norway, Greece, Italy, France, the Middle East and the United States on a broad spectrum of property transactions, ranging from residential apartments to office buildings of 9,000 square metres, logistics buildings of 90,000 square metres and hotels.
Our clients range from individuals wishing to acquire property for their own use to investors and end users in the pension fund, logistics, energy, aviation, shipping, insurance, commodities, hotels, retail and pharmaceutical sectors.
Ince & Co real estate partner Trevor Garrood commented:“The market for good London property appears to be robust, and we do not currently see anything to suggest that this will not continue.”