With the London residential property market experiencing a slow first quarter in 2019, particularly domestically, investors from Asia are seeing opportunities.  In these choppy waters, capital appreciation and rental yields are no longer the only considerations for investors, and as a result, investors are increasingly taking a wider range of dynamics into consideration.

A notable new trend is Asian investors assessing affordability and increasingly looking outside prime central London and instead towards zones 3 and 4 (the Docklands, Acton and Deptford for example) and “second tier” cities like Manchester and Birmingham. 

Beyond straightforward affordability, “value-add” is also fundamental.  Asian investors are looking at location and proximity to infrastructure and are conscious of the fact that Crossrail, HS2, airports, hospitals and public sector establishments all point towards strong and long-term rental needs.  

Within this market, accessing super prime developments at low entry values is also a popular tactic.  Smaller units (particularly studios) in high spec developments are increasing the choice for foreign investors seeking to attract young professionals with low rents relative to the facilities on offer (including gyms, swimming pools, concierge and more).

British education continues to be a huge attraction for Asian investors. This involves both parents looking for a pied-a-terre for visiting children boarding in the UK and international university students in need of accommodation for their second, third and postgraduate years of study.

In recent times, we have also seen an increasing number of residential developers varying deposit structures to meet the requirements of international buyers, who are keen to ensure their investment and currency strategies dovetail neatly.  The currency movements around Brexit continue to be of huge interest to Asian investors. 

The ever-changing UK tax system and the recent 3% SDLT surcharge on “additional properties” has resulted in an increased demand for cheaper units and a greater temptation towards multiple or “bulk” deals for which multiple dwellings relief can be applied or, on purchases of 6 or more units, lower commercial rates of SDLT can be obtained.  We also increasingly see parents purchasing in the names of their young adult children who do not yet own any property, to take advantage of lower, (sometimes first-time buyer), SDLT rates.  Investors are increasingly recognising the need for specialist and sophisticated tax advice.  With prices arguably looking a little full and the Revenue taking an ever-larger chunk of investors' profit, it is essential that the most efficient structures be put in place to maximise potential returns.

Despite the challenges touched on above, London real estate continues to offer exciting opportunities to Asian investors.  With the ever-increasing issue of under-supply of housing and with increasing volatility in international markets, it is understandable why Asian investors continue to evolve their investment strategies to make the most of what London has to offer.

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