Two-thirds of new London homes sold before completion are being purchased by Southeast Asian buyers, according to Land Securities Group Plc, the U.K.’s largest real estate investment trust.
Singaporeans account for a third of buyers from Southeast Asia, with a further third from countries including Malaysia and Thailand, while Hong Kong makes up another third, Tom Eshelby, residential director at London-based Land Securities, said in an interview in Singapore today.
Measures taken by Singapore and Hong Kong to cool their housing markets have prompted buyers to seek investments abroad. Singapore has linked borrowers’ maximum debt levels to their incomes and raised stamp duties and capital gains taxes, while Hong Kong has increased minimum down payments six times in less than three years and in February doubled stamp-duty taxes for all properties over HK$2 million ($258,000).
“The property curbs in Singapore and Hong Kong have stymied and paralysed the market,” Eshelby said. “Buyers are disenchanted with the local markets so they are looking overseas now.”
Prices in central London are estimated to climb 25 percent in the next five years, Eshelby said. London home prices have “massively outperformed” the rest of the U.K. over the past five years, he said. Meanwhile, prices in other parts of the U.K. are still not back to where they were in 2008, he said.
“It is possible London will do less well, but not by much,” Eshelby said. “There are millions of high-net-worth individuals in the world and there are thousands of new homes in London,” which suggests a continued imbalance between supply and demand, he said.
Luxury homes in central London have been the best performing in the U.K. since at least 2009, rising more than 60 percent from their low that year, according to broker Knight Frank LLP. Home prices in central London’s most expensive neighborhoods rose 6.8 percent in October from a year earlier, the slowest pace since December 2009, as asking prices deterred buyers, according to an index compiled by Knight Frank.
Land Securities will start marketing its 170-unit residential project -- part of a 5.5 acre (2.2 hectare), 2.2 billion-pound ($3.5 billion) development of offices, retail, shops and homes in the Victoria area -- early next year, Eshelby said.