Asian Investors Dominate Central London’s New-Homes Market for First Time
Asian buyers accounted for the majority of new home purchases in central London for the first time as they took advantage of the pound’s weakness and avoided rising prices at home, Knight Frank LLP said.
The share of deals increased to 59 percent in the six months through April from 48 percent a year earlier, the London- based real-estate broker said in a report today. Most of the Asian purchasers were based in Hong Kong or Singapore, where residential property prices have risen to records this year.
“The exchange rate is crucial,” Sebastian Warner, a partner at the firm, said in a telephone interview yesterday. “On the other side of the coin, their markets are incredibly hot.”
Asian investors, deterred by inflated property prices and curbs on speculation at home, are targeting markets such as the U.K. that may offer better returns. They acquired about 120 million pounds ($194 million) of London real estate in the past two months, with most purchases in the 400,000-pound to 1 million-pound range, Knight Frank estimates.
The pound has lost about 25 percent of its value against a basket of currencies since the housing market peaked in the third quarter of 2007. The Singapore dollar has appreciated by more than 50 percent against the U.K. currency in that time.
Hong Kong buyers acquired more homes than any other Asian country, accounting for 24 percent of all purchases of newly built properties. Singapore was second with 12 percent and Mainland China third with a 10 percent share.
In contrast, the proportion of acquisitions by U.K buyers dropped to about 35 percent in the six-month period from 40 percent a year earlier, Knight Frank said. London luxury-home prices rose at the fastest rate in a year in the first quarter, fueled by overseas buyers, Savills Plc (SVS) said in March.
Asian purchasers have reserved five luxury apartments at 10 Trinity Square, a Grade II-listed residential and hotel development near the Tower of London, according to one of the owners of the property. That’s half of the reservations that have been made for the 37 homes on offer.
“We’re looking to set a benchmark in the City of London,” said Leny Suparman, chief executive officer of Singapore-based KOP Properties Pte Ltd. Last year, KOP and Chinese investment firm Reignwood Group bought the Trinity Square building, which used to be the headquarters of the Port of London Authority. The conversion won’t be completed until 2014.
Hong Kong’s Boom
Hong Kong’s house prices have gained more than 70 percent since the start of 2009 to the highest since 1997, making it the world’s most expensive place to buy an apartment, according to Savills. Singapore’s economy grew at an annual rate of 23.5 percent in the first three months, driving home prices to a record.
Li Ka-Shing, who controls developer Cheung Kong (Holdings) Ltd., last week warned property speculators that the jump in Hong Kong’s home prices may not be sustainable. The city’s property price rally is nearing an end and may drop as much as 20 percent next year and a further 10 percent in 2013, Barclays Capital Asia Ltd. said last month.
Mainland Chinese account for about 10 percent of new London homes sold to foreign buyers and Hong Kong as much as 15 percent, Knight Frank’s head of residential research Liam Bailey said at a Bloomberg Link event in London yesterday.
“It’s a currency play,” Bailey said. “Most of the purchases are for an investment, because London is seen as a good place to put money.” Some properties are being used by the buyer’s family members, particularly students attending London universities, he said.
China Curbs Lending
Chinese Premier Wen Jiabao is trying to curb property speculation by placing constraints on mortgage lending, boosting down-payment requirements and limiting the number of home purchases. Home prices rose 28 percent in Beijing and 26 percent in Shanghai last year, according to the country’s biggest real estate website owner SouFun Holdings Ltd.
New homes are more popular among Asian investors than ones that have already been occupied, Knight Frank’s Warner said.
“They want the clean, crisp, new properties so that they can have a decent rental investment or a decent place to stay when they are in town,” he said.
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