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Why Asians are flocking to buy London property

artdivision27 May 2014

Why Asians are flocking to buy London property

We’ve heard a lot about overseas buyers being keen on buying property in the UK capital. Prime London is particularly popular – with Russians, Chinese and Middle Eastern among the most prolific purchasers.

“However, research recently undertaken has shown that Asian buyers especially have been benefiting from exchange rates against a weak pound. Figures show that the Chinese have topped this list – as they have seen the renminbi rise some 30 percent against sterling over the last half a decade, with other charts showing the renminbi having soared by 45 percent against the pound during this time. Property in Prime London has risen by some 25 percent in the same period.”

For example: if a property cost £1 million five years ago and has gone up by 25 percent, because of the renminbi’s growing strength, a Chinese buyer would be paying less in real terms. Other beneficiaries of currency exchange fluctuation include buyers from Singapore and Malaysia as well as Switzerland. It’s interesting that the seven percent stamp duty level introduced in 2012 on houses priced more than £2 million has had minimal impact on Asian buyers. It’s the same with the 15 percent stamp duty on any property over £2 million that was purchased through companies and special purchase vehicles – previously a favourite method by Chinese investors seeking to avoid their country’s currency controls.”

Research has also demonstrated that a large percentage of house purchases in Prime Central London are second homes for international buyers, with the great majority of these buyers having many business interests in the city. The fact that they are showing a big commitment to London proves that they are not just properties for investment purchasers. The competition for the best homes is set to increase, with predictions showing more than twenty percent in the growth of all prime residential values during the next five years.

With London a booming financial centre, a ‘go-to’ destination and an educational and cultural hot-spot, it’s clear that it’s not just the depreciation of sterling that’s had a major impact on international buyers looking for property in London. The recent recession, the turbulence in the Eurozone and the Arab Spring, means that Central London’s reputation for stability has boomed.

As well as this, increasingly low interest rates mean that debt is still cheap. The rate has been at an all-time low for the last five years, at 0.5 percent, seeing the pound drop even further. It’s no surprise therefore, that so many overseas buyers are flocking to the UK capital – and it’s evident that the UK’s capital city’s going to stay very popular among overseas buyers for some time yet.

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