Points north: overseas property investors trade up Prime Central to lock down and love in Hampstead

With the election making waves in the turbulent waters of the markets, there are fears that overseas investor appetites might be dampened by political uncertainty. Knight Frank revealed that on Friday the FTSE 100 was down 20 points on the previous week as investor hunger dissolved, an indication of the strength of the economy in the wake of news of a hung parliament.

The exodus may well have already begun. New research from Hamptons international shows that London’s Prime Central investors are moving away from top-tier properties in areas such as (newly Labour) Kensington.

“EU buyers have typically been the biggest proportion of overseas buyers in London but we’ve seen them drop back quite a bit in this quarter,” says Fionnuala Earley, residential research director at Hamptons International.

“It doesn’t mean to say that they’ve all turned their back on London because we’re not seeing an increase in sales. It’s maybe just that everyone’s a bit cautious about property at the moment,” she says. International buyers accounted for one third of sales in the capital as a whole in the first quarter of 2017.

With questions over Brexit at the foreground of everyone’s minds, our continental neighbours have become more reticent when it comes to purchasing property. Now they have been overtaken by Middle Eastern and Russian investors, who have been spurred on by more positive oil prospects and the strengthening of the rouble. For now, cash based investors are likely to dominate the luxury market.

Trevor Abrahmsohn, managing director of Glentree International believes that a weak pound is good for the overseas market. “Undoubtedly the pound will drop further against the dollar and euro which, perversely, will render UK property even cheaper for the international buyers and, at the same time, help the exporters. I predict that property values will not change markedly unless interest rates and mortgage rates are increased in order to keep inflation under control, which seems very unlikely.”

Enter the ‘super suburbs’. With Prime Central sales sluggish, it’s the suburban ‘villages’ that now command the greatest investor attention. Foreign investors now account for 17 per cent of suburban buyers, with EU buyers making up 10 per cent of sales compared with just 6 per cent in the final quarter of 2017.

Homes in areas such as St John’s Wood and Hampstead can command huge asking prices. With a glut of homes in the £5 to £10 million bracket, buyers are able to bag a (relative) bargain when it comes to negotiating.

“The proportion of overseas buyers in central London seem to have gone back to Prime London and I think that maybe because they’ve been able to negotiate [prices] down further,” says Ms Earley.

A property on Hampstead’s Redington Road was recently described in the press as a “perfect ‘lock up and leaver.’” On the market for £8,950,000 with Savills, the home features five bedrooms, swimming pool and spa, as well as “state of the art technology,” likely meaning round the clock security.

With all the mod cons of a contemporary high-end hotel, it reflects the trend for increased demand for hotel-style living, home gyms and high-tech control systems to ensure high spending investors’ maximum comfort when in town, and peace of mind when abroad. A second home at that price would command a stamp duty bill of £1,256,250, including the 3 per cent surcharge, making it a £10,206,250 purchase. That’s a lot for a part-time property by any standard.

Not everyone welcomes the idea of properties purpose built to be locked up and left for at least part of the year.

Sadiq Khan pledged in his election manifesto to tackle the issue of ‘lights off London’ spurred on by the number of ‘buy to leave’ properties bought by overseas investors to accrue capital. “Too often they are not the properties that London needs. Too many are sold off-plan to overseas investors, only to sit empty, and too many are simply not affordable,” he said. In March, Transparency International revealed that of 14 top tier developments in the capital, almost 80 per cent of properties were snapped up by overseas investors.

Camden currently ranks third behind Croydon in the tally of empty homes hotspots with 1,114 empty properties according to the Office for National Statistics. Top of the list were Kensington and Chelsea with 1,399 homes worth £664 million empty in 2016.

Yet overseas investment is an important part of our property market, and contributes in no small part to its buoyancy. Hampstead and St John’s Wood have large continental populations, many of whom have made London their home for the long term whilst they educate their children here.

A property in London is often touted as a central part of any self respecting portfolio, but it seems that buyers increasingly prefer to occupy their purchases rather than leave them empty. The total number of properties vacant for over six months in London has more than halved from its 2004 peak of 42,600 according to a report by Property Partner.

With a cheap pound, chief economist of Knight Frank, James Roberts is optimistic. Talk of remaining in the EU customs union, no second Scottish independence referendum and a more moderate government could mean increased investor appetite.

“I seem to be out of step with the national mood, because I am happy with the election outcome,” he says. “As for discussion of another election, with places like Kensington and Canterbury going Labour, I doubt many Conservative MPs will want another poll this year. These realities will sink in over the summer months, then I see investors taking advantage of the cheap pound, and buying UK property this autumn.”

With Prime Central investment and the pound down it seems the signs are pointing north for the Prime property market. With its property bargains to be had, independent shops and welcoming communities north London promises a home from home atmosphere whatever Brexit might bring. Let’s hope any newcomers choose to lock down and lover rather than lock up and leave.