It has been suggested that foreign buyers have lost interest in owning property in London and are becoming increasingly attracted to property funds.
In a report chief executive of London Central Portfolio, Naomi Heaton, says that her recent tour of investment sources in Kuala Lumpur, Hong Kong and Singapore shows “a notable shift in attitude amongst investors who would have traditionally chosen to hold property directly.”
It is believed by Heaton that the cause of this is down to the increased taxation and bureaucracy linked to landlords and rental property management.
She continues “There’s now a very real appetite to diversify their Central London residential holdings through fund structures …. Exempted from the new non-resident capital gains tax, upcoming non-dom inheritance tax, and unaffected by the new rules on mortgage relief. This seems very compelling for many investors, alongside the benefits of buying power, strong projected returns and competitive financing arrangements”.
Heaton who is now touring investment sources in Bermuda and the Middle East and says even the investors who prefer to buy physical properties rather than funds, are changing their behaviour.
The Marsh & Parsons estate agency have reported that domestic buyers have climbed to a new level of distinction in the capital’s property market.
It has been noted that during the third quarter of 2015, 79% of property purchases were made by domestic UK buyers, an increase from 75% in 2014.
Marsh & Parson issued this statement: “Sales activity from domestic buyers has surged forwards to fill the gap left by overseas buyers and investors, who have been left more cautious by the strong sterling, stricter government measures on non-domicile status, and heftier stamp duty for higher value purchases.”
The agency states that overseas and foreign nationality buyers only account for just over a fifth of all the prime Greater London property purchases during the third quarter of 2015. This is down from 25% of all sales during the third quarter of 2014.
CEO of Marsh & Parsons, Peter Rollings says “London has had to bear the brunt of some trying taxation changes in recent months. This has cast some shadows over the capital, but the millions of Londoners who live and work in the city have acclimatised much more quickly to the property taxation changes, and have risen up to fill the void left by overseas purchasers and investors”.
This pattern is also being mirrored in Prime Central London, traditionally favoured by overseas investors, with the proportion of foreign buyers standing at 32%.
Rollings continues “We’re noticing longer purchase chains than ever as domestic buyers really start to dominate the market, and demand is really putting a strain on supply”.