Marc has just returned from the first leg of their latest trip, having visited Hong Kong, Guangzhou and, for the first time, Manila. As usual, their presentations have been a resounding success so we asked Marc to tell us about what property investors in the Far East are currently thinking about London property.
Q. You were in Hong Kong for a whole week during this trip, hosting your popular Property Investment Seminars. You’ve been doing these for a number of years in the Far East and South East Asia – do you really get new investors attending every time?
A. Yes! Our seminars are popular with new and experienced investors. Apart from our marketing efforts, our clients refer friends, colleagues and family members. One client brought his dentist along – he owns two properties in Canary Wharf!
Clients return to us year after year for our ‘insider knowledge’ but we also see many entry-level investors wishing to invest in London property for the first time. On this occasion, due to demand, we hosted three property sessions each day. Attendance exceeded our expectations yet again, with all seminars oversubscribed. For the first time we hosted a weekend roadshow, allowing landlords and prospective buyers to just drop in and talk to our directors and international team.
Our audience were mainly Hong Kong and mainland Chinese, accounting for around 95% of our audience, with some expats too. We had around 120 delegates attend over the two days, a mix of professional individuals including financial planning consultants and other high-net-worth individuals.
Q. What were the main topics people were interested in hearing about this time?
A. Recent tax developments were high on investors’ list of questions – the additional 3% Stamp Duty payable on second homes and buy-to-let properties, the restriction of interest relief to the basic rate of income tax and changes to the Wear and Tear allowance. Most were interested in up and coming investment hotspots and also keen to hear our views on how the London property market is likely to perform over the next few years.
Q. Were investors put off by the 3% Stamp Duty increase?
A. Not at all. No-one welcomes increased taxes, but none were changing their investment plans as a result. An additional 3% tax upfront pales into insignificance with the potential long-term gains. Similarly, the new Replacement Furniture Relief, which replaces the Wear and Tear Allowance, has had little impact on investors’ plans.
Q. Are you still recommending London as a sound rental property investment?
A. Yes. While recent tax changes do make it slightly less appealing to investors, many are seeing capital growth of around 5% a year, together with rental yields of 4-6% a year in areas that are further out where property prices are lower. Investors are now very focused on Zones 3 and 4 where they can find more value for money and better returns. Properties in developments in emerging locations on the fringes of central London such as Surrey Quays, Kidbrooke, Greenwich and Colindale are achieving impressive yields of up to 6% thanks to lower purchase prices and high rental demand. This compares to an average yield of just 2.5% in central London.
Q. You’ve said that, historically, Hong Kong investors used to buy in more traditional areas like Knightsbridge, Kensington and Hampstead. Are your branches in these locations still seeing this pattern or are Hong Kong investors now buying somewhere else? Is there a new ‘hotspot’?
A. Hong Kong investors love super prime central London but rising prices have now pushed them further out. It is now hard to find an apartment in Zones 1 and 2 for less than £500,000. As I mentioned before, overseas investors who are looking to expand their portfolios and searching for the best returns in terms of capital appreciation and rental yield are now looking at Zones 3 and 4. These zones used to be less popular as banks were reluctant to finance investment beyonds zones 1 and 2 but this is now changing and finance is easier to access.
Q. Do you have any advice for investors who may be worried about the future of London’s buy-to-let market?
A. The UK property market has performed well historically and, even with recent changes, we believe the UK’s tax laws remain transparent and fair. London has huge housing shortages and one of the world’s strongest rental markets, with high rental demand from overseas and UK tenants. With freely available finance at historically low interest rates, investment potential in London property remains head and shoulders above most other capital cities. With this incredibly high demand, we expect the buy-to-let market to continue to grow and property, as ever, looks set to remain a solid, long-term investment.
Q. You extended your visit this time to Manila. What were you doing there?
A. We were invited by the British Chamber of Commerce, both to present a seminar and to meet existing clients. Around 40 people attended the event – around 60% of these were locals and the rest were expats. A further 20 investors attended an informal talk at Manila Polo Club – these were new clients. There was a lot of interest in UK property investment. Traditionally Filipinos have focused mainly on the USA market but with new tax regulations there and increasing knowledge about the investment potential of the UK, some are slowly shifting their focus to the UK.
Q. Which other regions did the Benham and Reeves Lettings’ take the property seminars?
A. Anita Mehra, our Managing Director continued the Spring trip by visiting Singapore, Kuala Lumpur, Kuching and Penang. Anita was accompanied by our Finance Director Vidhur Mehra. These meetings were also over-subscribed proving that the appetite for investment in London’s bricks and mortar remains as popular as ever.
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