A new report from property investment fund London Central Portfolio (LCP) reveals that 22% of prime London properties purchased this year were bought by overseas buyers without viewings. .
The data was collated from figures from the HM Land Registry UK House Price Index, which synthesizes reports that the property market is currently enjoying a post-pandemic boom.
LCP CEO Andrew Weir explained that the recent increase in interest from foreign investors was due to “four key calls to action”.
The most famous of these is Chancellor Rishi Sunak’s stamp duty holiday, which starts in July and exempts all properties up to £500,000 from stamp duty. The scheme is expected to increase the total number of homes eligible for stamp duty relief from 16% of all UK sales to 89%, according to analysis by Zoopla (LON:ZPG).
LCP said the current pound exchange rate is also proving “attractive” to overseas buyers. Despite news that the euro continues to struggle following a wave of national lockdowns across the continent, and concerns that the UK could fall into a double dip if a second national lockdown begins. , on Tuesday afternoon, the pound was trading surprisingly calm at 1.11 euros. This Thursday.
Prices across the current property market, compared to their peak in 2016, when the average purchase price in London was £473,000, have increased interest around the world, resulting in ‘families seeking a large investment’. “There is strong demand from offices and investors.” Some acquire large blocks of apartments if there is an opportunity to add value to maximize profits. ”
Nevertheless, a 2% surcharge is expected to be levied on international buyers from April next year, which will be applied to “365 days starting 12 months before the transaction and ending 12 months after the transaction.” applies to overseas buyers unless they have been in the UK for 183 days. ” – Although some foreign investors are discouraged from buying property in England and Northern Ireland, LCP says London “continues to be seen as a safe asset class that benefits from the rule of law at Greenwich Mean Time.” zone, prestigious educational institutions, global business language, and liberal culture. ”
LCP’s findings also show that new lettings started in the third quarter of 2020, as London’s reputation as the go-to city for young professionals appears relatively undamaged by the coronavirus pandemic. The number of young people under the age of 30 has increased by 21%.
Given the significant increase in purchases via virtual viewings and some “evidence of pent-up demand,” LCP predicts that in 2021, “a bull market similar to that seen after the global financial crisis will continue to rise in London’s prime markets.” He said he believed there was a high possibility that the outbreak would begin in the ground.
That remains to be seen, of course, but figures released by Rightmove (LON:RMV) last month show that the average asking price for a home in the UK has risen to an all-time high, driven by overly optimistic sellers and market momentum. did. The race is to sell before the stamp duty holiday ends next March.
There is no doubt that the housing market is in the midst of a post-pandemic boom, but there is no guarantee that this surge will be long-term, especially after additional government measures end in the spring.
And with an additional 2% surcharge set to be introduced from April onwards, overseas buyers may think twice before buying London property once the excitement starts to wear off.
