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PROPERTY: FAQs on investing in London


The Belvedere, a beautifully restored historic building near the West End that’s just a 15-minute walk to the city of London.
(Image: Regal Homes)

 

By Stella Thng

On any given weekend, the pages of The Straits Times are filled with ads for foreign properties jostling for your attention alongside local condominium launches. Developers offering waterfront homes in Johor Baru’s Iskandar, and apartments in Melbourne and London, aggressively pursue Singaporean investors with exhibitions.

A recent HSBC international property investment survey found that Singaporean investors’ favourite overseas property destination is still Malaysia, followed by Australia, China, India and the UK. SLP Scotia vice-president Francis Tan, who has been marketing UK properties for over three years, observes: “UK properties consistently perform well but, in the last few months, they have been enjoying a mini boom in terms of interest from investors.”

The burgeoning interest in overseas properties is likely fuelled by Singapore’s current property investment climate. Stricter regulations, such as the revised debt servicing framework and Additional Buyers’ Stamp Duty ranging from 7 per cent to 15 per cent, make it harder and more expensive to invest in multiple properties locally. Investors who don’t want their money sitting in the bank earning a pittance in interest are thus actively hunting for opportunities abroad. “Many Singaporeans prefer to invest in brick and mortar in an old, rich country like the UK,” says Francis. Properties in the capital city of London are particularly popular. What makes the city so attractive to Singaporean investors? We answer your FAQs.


WHAT DO SINGAPOREANS LIKE ABOUT INVESTING IN LONDON PROPERTIES?
According to London-based property developer Alice van Grutten from Regal Homes, London is seen as a safe haven for overseas investors. “Overall, the property market throughout the rest of the UK is rising, but not at the same rate as its capital. Previous experience also demonstrates that if the UK property market experiences any drops or lulls, the London market is always the first and quickest to recover,” she says.

In addition to its political security, the UK’s education system is also a strong draw. Many of Alice’s clients purchase property in London because their children are studying there. Instead of shelling out rent weekly, some parents prefer to use that to service a bank loan for their own property while waiting for capital gains. For example, entrepreneur Daisy Lau bought a £260,000 studio apartment in Octavia House at Imperial Wharf three years ago, when her daughter enrolled in the Royal Academy of Dance. A similar unit was recently marketed for £375,000.

Francis adds: “A number of my clients are doctors and lawyers who previously studied in the UK, preferring to invest there because of their strong emotional attachment.” Even investors who have never lived there like the sense of familiarity between the country and Singapore, such as their similar legal systems.


WHY IS THIS A GOOD TIME FOR SINGAPOREANS TO INVEST IN LONDON PROPERTIES?
“With the pound relatively low against the Singapore dollar (S$2.11 to the British pound, at press time), it is an exceptional opportunity for investors,” says Alice.

Capital and rental yields also look promising. Citing a 2013 report from BNP Paribas Real Estate, Francis notes that the population in London has been growing since 1998 and is expected to continue till 2031. Home values across London went up by 8 per cent over the previous year and as much as 14 per cent for prime residential properties. This led to many locals renting instead of buying, buoying the rental market; London’s rental growth figures are the highest in the UK. According to the report, average rent in Greater London hit more than £1,100 per month in May last year, while Central London rent averaged £2,500 per month.


DO INVESTORS HAVE TO PAY CAPITAL GAINS TAX WHEN THEY SELL THEIR PROPERTY?
Currently, only UK citizens and residents pay Capital Gains Tax (CGT) of 18 per cent or 28 per cent, depending on their income level, on profits from the sale of any property that is not their primary residence. Come April next year, foreign investors will also be subjected to CGT.

Still, it hasn’t dented the number of sales enquiries that Regal Homes receives since the upcoming regulation was announced last year, says Alice. “With the pound still relatively low and the history of currency movements working in Asian buyers’ favour, the capital returns that the London property market has to offer far outweighs the cost of CGT.”


WHERE SHOULD INVESTORS INVEST IN?
As with all property investments, consider theproject’s distance to transport links, local amenities and the general area. Alice suggests looking in areas of growth or proposed regeneration, such as Elephant and Castle, Southwark and Kings Cross, before prices shoot up.

“These are prime regions to purchase property and they have been forecast to offer high returns. Hackney and Shoreditch are still relatively inexpensive compared to other more central locations,” she adds.

The construction of the highly anticipated Crossrail train line also bolstered property prices near the new transport link. “It is reported that house prices within a 10-minute walk of a central London Crossrail station have risen by more than 30 per cent since the project was announced in 2008; these prices are predicted to rise by a further 40 per cent in the next four years,” says

Alice. Other notable areas include Rotherhithe across the River Thames from Canary Wharf and Peckham, just 10 minutes to the London Bridge, suggests Francis. “Enfield is also another darling of investment property and was voted as one of the best areas for buy-to-let properties in London,” adds Francis.

For a first-time investor looking for steady capital and rental yield, Alice recommends Kings Cross. “It is in Zone 1, a very central London location with exceptional transport links, including the Eurostar, and offers remarkable investment opportunities without the Midtown or West End prices.”

The Belvedere, an elegant restored historic building, is also in a great location. Just five minutes from Holborn station and a 15-minute walk to London, it is near Covent Garden, Leicester Square and the West End. Completely sold out within two weekends, a resale one-bedder was recently listed for £680,000.

For investors who want to flip properties and make a quick profit, Alice says areas such as Shoreditch are popular with those who are looking to sell their contract to another investor and make a quick buck. Situated in Zone 1, it has seen substantial growth over the past years, though per-square-foot prices remain reasonable.

One such growth project is the upcoming Banyan Wharf in Shoreditch, located near Old Street station. It is within walking distance to major tourist attractions, and London universities are easily reached on foot or by public transport. A one-bedder at the sleek 50-unit apartment block was recently marketed at £600,000.

For a base to study or work in London, “Queens Park is an established residential area spanning Zones 1 and 2. Areas like West Hampstead and Queens Park offer comfort, security and excellent transport links into the centre of the city, and have proven to be a good investment,” says Alice. The Residence at West Hampstead, for example, is accessible to London via three stations – the Jubilee Line Underground Station, London Overground and Thameslink. Prices start from £530,400.

But don’t ignore the potential of other cities, especially those in growth areas. Look for opportunities in those undergoing regeneration schemes with approved government funds, such as Manchester and Liverpool. Another option: purpose-built student apartments. According to research conducted by property website Zoopla.co.uk last year, Glasgow is the best student town for investors who buy to let, with the highest average rental yield at 4.95 per cent; London was No. 10 at 4.2 per cent. A four-bedroom student property in Glasgow costs £262,888, while its equivalent in London costs £995,104.

At the end of the day, there is money to be made if you know where to look, so consider your budget and do your sums carefully.

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