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Investment Advice

Housing Demand Expected to Boom with Stamp Duty Holiday

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In a bid to revitalise the pandemic-stricken housing market, Chancellor Rishi Sunak announced the suspension of stamp duty on the first £500,000 of all property sales on the 8th of July 2020, effective immediately until the 31st of March 2021. The change affects around 90% of buyers and London investors are chomping at the bit for substantial tax discounts in the capital. Overseas investors are not only incentivised by these cuts but also the looming stamp duty surcharge next April, the favourable currency fluctuations and London’s resilience in crisis. Investors from Hong Kong in particular will see this as a further incentive to buy, given that the BNO passport and exchange rate currently sits in their favour.

Pandemic Effect

COVID-19 and the UK’s lockdown put a hold on property sales across the country, with the number of properties coming to market down by 90% in May compared to 2019 (Rightmove), and the number of transactions down by 50%. With the market reopening in May, activity started to increase but is expected to plateau as demand waivers.

With the chancellor’s announcement, traffic to Rightmove immediately increased by 22%. The suspension raises the nil-rate stamp duty threshold from £125,000 to £500,000, saving buyers up to £15,000.

Above £500,000, buyers will pay 5% between £500k and £925k, 10% between £925k and £1.5m, and 12% above that.

Who will benefit?

First-time buyers will not have to pay the 5% stamp duty on purchases between £300k and £500k, encouraging a number of buyers to enter the market and generate a ripple effect for the rest of the housing market. Home-movers will free up necessary housing stock for first-time buyers and movement to areas with stronger employment markets will also boost the economic recovery. Market researchers believe that Sunak’s temporary changes will revive the housing market and consumer confidence, triggering a knock-on effect for the economy as a whole.

The London housing market will see considerably favourable effects as new stock is snatched up this year and affordability for first-time buyers, home owners and investors will improve as demand is boosted by the stamp duty suspension.

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What about investors?

Although investors and second home buyers will still have to pay 3% of the property value, they are still saving on stamp duty – in London, one in five landlords pay over £500,000 for an investment, meaning their average stamp duty bill will decrease by £7,240. Aneisha Beveridge, head of research at Hamptons International, has said that the savings “might be enough to lure those investors teetering on the edge of whether to invest, particularly in London and the south”.

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Stamp Duty Examples from Savills UK

Foreign investors are already snapping up UK property ahead of the stamp duty surcharge in April 2021, with property firms seeing a rise in enquiries from overseas. Investors from Hong Kong are seeing the chancellor’s announcement as a golden opportunity to invest in a “safe haven” for property investment. Nearly three million BNO passport holders in Hong Kong have been offered the right to live and work in the UK, and currently 1HKD can buy 0.10GBP in comparison to 0.096GBP at the end of 2019. The combination of incentives is driving demand and buyers will be looking to take advantage of the rare opportunity.

Eligibility

The SDLT holiday is effective immediately until the 31st of March, 2021. This means that property transactions must be completed before March next year to reap the benefits, even if exchanges are made prior to the deadline. Buyers are therefore showing demand primarily for newly built flats, those completed before the deadline in March, or second-hand properties.

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As we trudge along with dwindling hope in the midst of a global pandemic, the property world is ready to flourish with an onrush of demand as a result of the decision to suspend stamp duty by Chancellor Rishi Sunak. The capital in particular is expected to benefit greatly from the temporary change and the UK economy should see a knock-on effect from increased consumer confidence. Overseas buyers are using this opportunity to invest in safe haven assets and strike while the iron is hot.

For more information or to see our available properties, visit www.fct-property.com or contact Freddie at freddie@fct-property.com.

 

 

Sources:

https://www.theguardian.com/business/2020/jul/08/stamp-duty-holiday-revive-housing-market-summer-statement-property

https://www.savills.co.uk/insight-and-opinion/savills-news/302206/what-the-stamp-duty-holiday-means-for-the-housing-market

https://www.rightmove.co.uk/press-centre/house-price-index/may-2020/

https://www.forbes.com/sites/garybarker/2020/07/08/who-benefits-from-the-stamp-duty-holiday/#543f6a477711

https://www.lettingagenttoday.co.uk/breaking-news/2020/7/typical-buy-to-let-investor-set-to-save-almost-2k-thanks-to-sunak?source=newsticker

https://www.buyassociation.co.uk/2020/07/09/stamp-duty-cut-how-it-affects-buy-to-let-second-homes-and-limited-companies/

Images:

https://www.willpearson.co.uk/london-begins-a-london-sunrise/

https://www.willpearson.co.uk/london-from-the-south/

https://www.willpearson.co.uk/sunlit-london-panorama/

Will London adapt to life after COVID19 and remain one of the most attractive cities for work and leisure?

By Investment Advice No Comments

“Post-COVID life” still seems utopian at this point, with businesses grappling for work-from-home policies and a universal panic that the global economy is crashing harder than in 2008. Those working from home are realising what they really want out of their property and living area, whether it be more indoor and outdoor space for the possible extension of lockdown, or an everything-on-your-doorstep area to avoid travel and transport in the future. But, if offices are becoming redundant and people are looking for more open space, why is London still the hot topic in the property world?

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Stability

At the risk of sounding like a broken record among other articles on London real estate, London is known for its resilience to economic downfalls and remains a reliable investment as a result. There is no denying that COVID-19 will have a considerable effect on the UK economy, but if you are seeking capital retention then London is your city, as the attraction of its political and legal stability for both domestic and overseas buyers will remain consistent.

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Consumer Confidence

While London remains attractive from the perspective of long-term stability, the current economic situation poses as a worry for potential buyers, but we should recall the strong rebound London made after the credit crunch, with a 73% increase in house prices over the last ten years. Real estate trends often align with consumer confidence, which plummeted in 2008 as banks were insufficiently capitalised and the US housing bubble burst. The current situation differs from the financial crash in that health sits at its core – those negatively affected by the present state of the economy are obliged to accept that the government is having to find the balance between physical and economic health. This acceptance, along with the deployment of financial safety nets to avoid history repeating itself, will allow consumer confidence to recover sooner than in 2008 and the housing market will bounce back.

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Post-COVID Checklist

Economic worries aside, lockdown and work-from-home culture are changing what we want from our property and surrounding area, leading to many seeking new homes in more rural areas. On top of this, companies are rethinking their need for office space as working culture shifts to accommodate for post-COVID changes. However, businesses still view London as the best location for their base, with many looking to downsize their offices outside of the capital to move back to the centre, particularly with the view to attracting young talent who will not want to commute from afar. London provides an international business hub in a time zone that allows for communication with US and Asian markets during the day. Its connectivity with the rest of the world, both virtually and physically with its plethora of transport hubs, is what makes London so desirable. Young people are flocking to live where their work and social life can flourish in the vibrancy of London’s city landscape and they are within reach of everywhere and everyone once lockdown restrictions ease.

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Demand from Hong Kong

Overseas buyers are also attracted to London’s range of assets, particularly as countries deal with COVID-19 in a variety of ways and politically divide their residents. Amidst the pandemic, Hong Kong residents have had to consider their long-term future residing there as China tightens its grip on security measures.

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The recently enforced National Security Law in Hong Kong by Beijing has provoked the UK to open a route for nearly 3 million Hong Kong residents with British National Overseas (BNO) passports to live and work in the UK. This has triggered a surge of potential buyers, with Midland immigration consultancy experiencing 100 enquiries per day at the start of June. For many of these, London provides a similar vibe to living in Hong Kong, with its vibrant city atmosphere and hub of international business.

To sum up, nothing is putting a dent in people’s desire to buy, rent and live in London property, even as we endure a global pandemic and economic crisis. The capital city’s long-term capital retention and general vibrancy as a place to live will shine through the present struggles and prove to us that London’s property market is indestructible.

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To learn more about the future of the London property market or to find out about our properties, visit our website fct-property.com or contact us today at

contact@fct-property.com.

Sources:

https://life.spectator.co.uk/articles/why-you-should-think-twice-about-moving-out-of-london/

Image sources:

https://secretldn.com/best-things-to-do-london/

https://www.willpearson.co.uk/bishopsgate-rising/

https://www.bloomberg.com/amp/news/articles/2020-07-01/u-k-to-give-hong-kong-nationals-way-out-after-china-crackdown

https://www.willpearson.co.uk/londons-new-skyline/

The Future of Central London’s Housing Market Post COV19

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Business as we’ve known it has changed and will continue to do so, given the current crisis of COV19 that the entire world is facing. Perhaps however, it is not the question of what we do, but how we do it?

Here and now, COVID-19 has paralysed the conventional “practicality” of conducting business in the property market given the social distancing measures in place. However, when read through the lines we can see strong bouts of opportunity for stable and returning investments.

When I think about the longer term implications from the effect of COV19, the “new normal” and how long (if ever) it could take for working environments to return to the way it was before, a large chunk of the workforce will continue to adopt a work from home style culture. Less people would be comfortable going back to working in large open-plan offices, if the work style is conducive in avoiding this.

This will have massive long term implications to property markets around the world and most so in major cities. Developers and planner will be noticing these changes in working life style and will adapt to building more PRS to adjust to this demand, potentially altering a lot of the city’s landscape.

For example, large corporations in legal and finance will still have their main offices active in the major cities, but employees would not be expected to do the typical 9-5 workdays. Especially with the rate of development in online systems and customer service platforms. London’s residential market by nature will flourish as people would still want to be close to their place of work/office whilst having the vibrancy and convenience of city living. Just the same, the more rural areas of England would also benefit from this emerging style of working.

WFH is a trend that will continue to rise in London, boosting rental values in the residential market
  1. Restricted movements.

The Housing Minister has advised against home moving during this time. Official advice from the government on home moving has encouraged both parties of an occupied property to do what they can to amicably agree alternative dates of moving, to a time that is likely that stay-at-home measures would be lifted. For those of us who are concerned about shifting the terms of lease agreement dates, UK finance have confirmed that in order to support customers who have already exchanged contracts to extend their mortgage offer for up to three months to enable the move to be pushed to a later date. Lenders will work with customers to help manage their finances as a matter of urgency.

Recommendations from the Housing Minister have directly led to a reduced period of activity in both sales and construction. This could temporarily lead to a dip in housing prices. Buying and selling can continue during this period but there must be light given to the fact that this process may take longer than usual.

2. Political certainty

Greater political certainty following the large conservative majority from the election in December 2019 (which was largely considered a “Brexit Election”) saw London property prices rise 2% from Jan- Mid March this year according to Savills Research.

House prices rose at their quickest pace in 18 months in February with the London market in particular rebounding “at an astounding rate”. The charge being led by the Capital where buyers have flooded back since Boris Johnson’s election win. As of mid-March, Rightmove said sales agreed rose by 34.4% to reach their highest figure for this time of year since 2016, whilst house price growth was at its highest since May the same year. “It took fifteen days fewer for homes to sell once they’d been put on the market.” Notably, these price indexes are based on figures prior to Government escalation to their response of the Covid-19 from “contain” to “delay”.

3. Travel restrictions.

However, the market fundamentals are still there and there are optimistic opinions over the virus’ effect on the property market. Once this short term blip is out of the market the suppressed pent up demand that are building from both a buyers and rental perspective will splurge onto the market which will lead to a positive V shape growth pattern. “As an industry, we are yet to see the true impact of Covid-19 on the market. However, if fewer people choose to holiday abroad over summer, we could perhaps see an increase in activity in this traditionally shower period”, said Nick Leeming – Chairman of Jackson-Stops. Furthering from this point is that observing the current state of  the aviation industry, tourism worldwide is expected to be dramatically halted at least until next summer of 2021. Therefore, brits are expected to stay throughout the summer in the UK, and we can expect an increase of property investment once movement controlled orders are relaxed.

4. London’s proven resilience against uncertainty.

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In uncertain times like this the London Property market has proved time and time again its resilience and ability to bounce back much quicker than most asset classes which is why it is so popular for investors around the world. It is also not just safe but extremely profitable. According to Savills’ latest report amid the turbulence of the pandemic, the ONS released its house price index for the very first time showing us data from the last 25 years across England and Wales. It showed us that the London borough Hackneys property market has increased 850% over the last 25 years. At a time like this, where the society and globe as a whole is riddled with fear, panic and anxiety, it is even more vital to keep the bigger perspective in mind. Investors who can see past these short-term bumps in the road are far more likely to benefit from even larger returns, years from now.

Buying at a time like this could be recognised as higher risk when evaluating the current market conditions, however investors would be backing on an accelerated V Shape bounce back in prices and the continued growth that we saw in the market earlier this year.

5. A stronger currency.

The GBP has made significant gains against the USD over the past week and a half,  proving its resilience and ability to rebound quickly whilst other major currencies like the AUS Dollar and Yen have continued to weaken over the same period. As the world continues to collectively fight against the spread of this disease, the next few weeks will be vital in monitoring the currency valuation. Historically speaking, GBP is precariously weak against the USD and is a great opportunity for overseas landlords to buy.

We are to help guide our landlords and potential buyers through this period. Being the underwriter of our developments means that we have the autonomy to adjust price expectations to reflect the current market conditions. Investors should be tuned in at this point in time not be discouraged or fearful!

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Ref:

https://www.homesandproperty.co.uk/property-news/uk-house-prices-surge-london-property-market-brexit-drama-a137041.html

https://www.savills.co.uk/blog/article/298520/residential-property/25-years-of-house-price-growth-reveal-a-highly-localised-market.aspx

https://www.homesandproperty.co.uk/property-news/london-house-prices-coronavirus-stamp-duty-brexit-a137366.html

https://www.gov.uk/guidance/government-advice-on-home-moving-during-the-coronavirus-covid-19-outbreak

Life After Brexit, What is the future for London?

By Investment Advice No Comments

With Brexit in the bag for Boris, what can we expect to see in the near term and more importantly, how has this been an opportunity for overseas buyers to capitailse on the uncertainties?

 

Firstly, there is a returned confidence in prices not plummeting. Many analysts and real estate agents are speaking of the London market “bottoming out” now that the risk of leaving the EU without a deal and crashing out of the union causing a potential panic in the UK economy is much less than what it was. Is this post-Brexit bounce here to stay?

 

  1. Confidence returns:

For the first time in two years, house prices in every region of the UK have increased. Specifically, in London, prices have seen a jump to 2.3% year on year in December 2019, the strongest rise since October 2017. The Office for National Statistics (ONS) mentioned “Increased London house price growth may reflect a larger shift in the type of properties being sold than usual, with more sales of very high value properties”.

 

These figures evidently prove London’s resilience as a place for secure investment, despite the uncertainties prior to the final verdict for the results of Brexit.

 

In fact, Howard Archer, the chief economic adviser to the EY Item club also mentioned that latest sales data from the Halifax and Nationwide pointed toward a further firming in house prices as of January 2020. “There is absolutely a fair degree of evidence that the housing market has got an initial leg-up from increased optimism and certainty following the decision from the general election result as well as greater near-term clarity on Brexit, with the UK leaving the EU on 31st January, with a deal.”

 

Durham, an economist at PWC states “Price growth in London in particular has rebounded, and has been trending upwards since the middle of 2019. It appears that increased certainty in the economy, particularly related to the Brexit agreement and GE results have unlocked pent-up demands and helped push prices up,”

 

Homes in London have now seen their rise to £484,000 (ONS). “Assuming that everything goes smoothly during this transition period, and the economic environment remains resilient, we expect continued positive housing price growth for the rest of 2020.

 

  1. The pound

Overseas buyers should find lower prices than in recent years, particularly if their spending is in US dollars. Savills state that the average price in prime central London has fallen by about 21% since it peaked in 2014, which means that once currency exchange is factored on, US dollar buyers now can reap a discount of about 38% than compared to 5 years ago.

 

Even more so, recent published data have shown that the UK economy contracted more than expected in November 2019, adding further pressure on the Bank of England to lower interest rates. The prospect of a rate cut has weakened the sterling – attracting overseas buyers in search for a good bargain.

 

  1. Mortgage approvals

 

The latest Bank of England data shows us that mortgage approvals for house purchases rose markedly in December 2019 to 67,241 – the greatest monthly level since July 2017.

 

Mortgage approvals in December were likely to be lifted once again by increased confidence and reduced uncertainty both amongst buyers and sellers after the general election results.

 

  1. London – The top tech hub for overseas expansion

Ever since the creation of the ‘Tech City’ project in 2008, London has affirmed its position as a global super hub for international tech investment and talent, with evidence showing that over the last 10 years London has received over 900 tech foreign direct investment projects – more than any other major tech city globally. This in itself has created greater than 28,000 jobs.

 

Despite uncertainty from the previously unknown results of Brexit and the referendum, data from 2019’s London Tech week by London & Partners show that London is the top destination for international tech companies looking to set up or expand operation outside of their own company. Between mid 2018-19, 91 international tech firms chose to expand or set up operation in London with total investments worth £864m – more than the likes of other major cities such as Singapore (79), Paris (46) and New York (32).

 

Sadiq Khan, Mayor of London said “London is Europe’s leading tech hub, helping to create more jobs and investment for the capital and greater UK economy. As our city’s tech ecosystem continues to grow it is important that we encourage greater inclusivity and diversity across the tech sector and ensure that London stays open to investment and talent from around the world”.

 

A great number of the globe’s greatest tech companies have made long-term expansion announcements and investments into London in recent years:

 

  • Apple – the tech giant is set to open a new London campus in 2021 worth £9bn within the large Battersea Power Station redevelopment project, which caters to 1,400 staff.

 

  • Google – plan to open a new headquarters in Kings Cross, housing up to 4,500 staff.

 

  • LinkedIn – as of January 2019 have moved into its new UK headquarters in Farringdon.

 

  • Spotify – In April 2019 announced a new innovation and research hub in London, creating at least 300 new jobs.

 

  • Facebook – made an announcement that they have chosen London as a base for developing WhatsApp payments, hiring at least 100 people. Further, also announcing their decision to lease three new offices also in London King’s cross area, doubling their UK headcount in London with room for at least 6,000 staff.

 

  • Microsoft – opened its first European flagship store located in Oxford circus as of July 2019.

 

  • Amazon – Amazon UK announced their plans to double the capacity of their London development centre, creating room for more corporate and R&D roles across their London offices.

 

Prime minister Boris Johnson has also pressed on his plans for an £800m research facility in developing top-secret technologies to give Britain the edge when it comes to defence and security. The new research facility will be based just outside what is called the “golden triangle” of London, Cambridge and Oxford.

 

Perhaps this move in the direction towards attracting more tech firms will diversify London’s reliance on the financial sector which in turn could set the city for more long-run stability.

 

Foreign investors – the time is now.

 

It is important to note that especially for overseas buyers, the recent rush for prime London sales is indeed an indication of renewed confidence. However, analyst Neal Hudson says the uptick could be short lived for foreign buyers depending on how long it takes for Brexit policies and negotiations to be implemented. Foreign investors are speeding through their purchasing to beat a discussed additional 3% premium on foreign sales from already high 12% rate.

 

 

Whitechapel – A place for investment?

Boris Johnson stated in his Brexit speech last July that his wishes are for Britain to work towards becoming a world leader in both science and medical research post-Brexit.

 

This could lead to areas such as Whitechapel turning into investment hubs for exciting urban planning. Furthermore, Whitechapel is also home to the Royal London hospital which currently has Queen Mary University building a sophisticated new medical research centre.

 

 

Sources:

Financial Times

The Week

CityAM

The Guardian

London & Partners

Weak Pound Guiding Hongkongers’ Contingency Plans

By Investment Advice No Comments

Protests persist in Hong Kong following Carrie Lam’s failure to formally withdraw the extradition bill, leading to political and social uncertainty for the future of the city. Citizens are looking for a “plan B” in cities like London, especially whilst the pound is currently weakened by Brexit uncertainty, where they can migrate to in order to avoid what may end up as a complete deterioration of Hong Kong’s freedom and legal system as it is now.

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Source: https://www.scmp.com/news/hong-kong/politics/article/2157756/what-british-national-overseas-passport-and-what-holder

Hongkonger Contingency Plan

Ongoing demonstrations and anger towards the extradition law and crumbling of Hong Kong’s freedoms are causing Hongkongers to rethink a long-term future in the city and make plans for migration.

A secondary school teacher speaking to South China Morning Post said, “Given that the environment in Hong Kong is not very promising … we want to have another choice if things go very bad here.”

Those not wanting to witness Hong Kong’s diminishing freedom are considering their options elsewhere, with the UK being a top candidate amongst Canada, the US, Singapore and Malaysia. Hongkongers who have previously considered emigrating are seizing the opportunity before the political situation worsens and begins to affect everyday lives, and whilst the pound sterling is at a weak point in the UK, investors are taking advantage of this critical time to form a contingency plan. There has also been talk of the British government granting citizenship rights to Hongkongers, illustrating the desire for Britain to help its former colony without intervention.

Since June, Hong Kong has seen its citizens stand up against an extradition law that would potentially see criminal suspects in Hong Kong extradited to China, which many protesters believes undermines Hong Kong’s legal freedom and marks the beginning of the loss of all other Hong Kong freedoms. The Hong Kong police began using teargas and rubber bullets, sparking anger in peaceful protesters and triggering some of the worst violence Hong Kong has seen in decades. Despite Carrie Lam’s announcement that the law was “dead”, protesters were not satisfied with the lack of formal withdrawal and the demonstrations across Hong Kong persist.

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Source:https://www.scmp.com/news/hong-kong/politics/article/3020416/beijing-respond-social-unrest-hong-kong-after-more-violent

Gillem Tulloch, founder of GMT Research, became one of the first Hong Kong finance professionals to say that he might relocate to Singapore or the UK due to concerns that his firm’s often-critical research reports into mainland Chinese companies make its staff vulnerable to false allegations in China that could be used as a pretext for extradition.

With the risk of a gradual deterioration in the political and social freedoms of the Hong Kong, the UK and London in particular offer a dependable legal and education system whilst also having historical and cultural ties to Hong Kong.

The Weak Pound and Johnson’s EU Rejection

In July, the sterling dropped to its lowest point against the dollar in two and a half years following the new prime minister’s talk of a no-deal Brexit. In recent news, Johnson was confident that EU leaders would change their position on the Northern Ireland backstop in the withdrawal agreement, yet his confidence was shown to be futile as the European Union rejected his request to remove the backstop, and the possibility of a no-deal Brexit is seemingly ever more of an inevitability.

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Source:https://news.sky.com/story/weak-pound-more-to-falling-sterling-than-no-deal-brexit-fears-11772929

The Independent have said “the pound is set to fall even further as the likelihood increases of a no-deal Brexit”, meaning investors are seizing opportunities in the UK while prices are low.

On Tuesday, Angela Merkel made comments on finding a solution to the backstop problem, which triggered a sharp rise in the pound. Boris Johnson will talk about his new plans in Berlin and Paris this week, which could prove to be important for the sterling if Angela Merkel and Emmanuel Macron are open to his suggestions.

The prime minister insists that Britain will be leaving the European Union on the 31st of October, with or without a deal, and until then, it is unlikely that the pound will fully recover but may experience the effect of reactions to headlines as decisions are being contemplated.

Investors

During the current trade war between the US and China, investors are seeing this opportunity with the weak pound and tech firms in particular are flooding into the UK whilst prices are low and investments can grow in the long term.

“In total, Asia invested $1.8bn into the UK tech sector in the first half of this year, compared to $0.6bn the year before,” says BBC News, demonstrating the confidence investors are placing in the UK, triggering a domino effect for other investors.

Some investors are worried about what impact Brexit will have on the UK’s tech talent pool if EU nationals aren’t able to work in the UK in the event of a no deal Brexit, however with the possibility of Hongkongers migrating to London, Britain could see an increase in highly skilled professionals from its former colony. The UK may also make the immigration process for overseas workers easier and more welcoming in the future in order to combat the potential issue with EU workers.

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What’s to come?

Asking prices in London have increased for the first time in two years, showing signs of renewed confidence as Johnson assures Brexit’s definite completion. Fears that Hong Kong life will become increasingly more affected by its political upheaval will drive Hongkongers towards migration in Europe, Singapore and Canada. Whilst the pound is weak, the UK is attracting Asian investors and provides an opportunity for Hongkongers to form a contingency plan in the case that they wish to abandon their hope in a future solution to the political struggle that is currently taking place.

 

 

 

 

 

 

Sources:

https://www.theguardian.com/politics/2019/aug/20/donald-tusk-rejects-boris-johnsons-bid-to-remove-the-backstop-brexit

https://www.poundsterlinglive.com/gbp-live-today/11906-gbp-to-eur-and-usd-johnson-letter-to-tusk

https://www.scmp.com/week-asia/politics/article/3019392/portugal-new-home-those-who-fear-hong-kongs-fate

https://www.bbc.com/news/business-49413186

https://www.bloomberg.com/news/articles/2019-06-12/stock-researcher-spooked-by-extradition-bill-may-leave-hong-kong

https://www.homesandproperty.co.uk/property-news/house-prices-in-london-asking-prices-see-growth-for-first-time-in-two-years-a132806.html

https://www.independent.co.uk/news/business/news/pound-live-dollar-euro-exchange-rate-brexit-no-deal-gbp-usd-a9046456.html

Long-Term Capital Growth from Crossrail 1 and HS2

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At the end of February, FCT Developments presented our breakdown of Crossrail 1 and HS2 and how infrastructure like these provide long-term capital growth in particular areas of London property. In this article we will cover all the main points from the presentation for anyone who missed out.


What are Crossrail 1 and HS2?

Crossrail is a 118 kilometre railway line under development in London and will connect Reading and Heathrow in West London with Shenfield and Abbey Wood in East London. Crossrail is Europe’s largest construction project and one of the largest single infrastructure investments undertaken in the UK. It is set to increase Central London’s rail transport capacity by 10%, carrying 200 million passengers per year, bringing a further 1.5 million people 45 minutes closer to Central London. It is also expected to increase the UK’s economy by £42 billion per year.

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HS2 is a 530 kilometre high-speed railway under construction, which will link London to Birmingham and Birmingham to Manchester, Leeds and the East Midlands, connecting around 30 million people. At speeds of up to 400 kilometres per hour, HS2 outcompetes all other current operating speeds in Europe and would run as often as 14 times per hour in each direction. To give an example of its speed, the journey time between London and Birmingham will be cut by 32 minutes – just a 49 minute journey – and there will be 18 trains every hour between Old Oak Common and the North, which means passengers will be able to reach Birmingham airport in just 31 minutes. It is scheduled to open in phases between 2026 and 2033.

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The MTR Effect

Let’s bring an example closer to home – in Hong Kong, MTR opened two new lines in 2016: the Kwun Tong extension line to Ho Man Tin and Whampoa, and the South Island line. The 7 stations along the two railways house a population of approximately 350,000.

MTR Effect of the Kwun Tong Extension Line – According to JLL, the ‘MTR Effect’ led to an upsurge of 90% and 85% in residential property prices at Whampoa and Ho Man Tin respectively from the development’s announcement in December 2009 to the official opening of Kwun Tong Extension Line.

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MTR Effect of the South Island Line – The Land Registry’s records showed the average sales price of South Horizons flats in Ap Lei Chau increased from HK$13,320 per square foot in January 2016 to HK$17,000 per square foot in July 2017.


A General, Two Phases of Growth as a Result of Crossrail and HS2

Phase 1:  The station location will be announced and there will be a surge in land purchase activity within a mile radius of these stations and buy-to-let investors will be looking  to hedge their bets on growth. This is otherwise known as “Hope Growth”. Major estate agents also report that this stage is also attractive to first-time buyers and around 70% of buyers in 2008/09 were indeed first-time buyers, suggesting that attitudes in the UK have shifted from home-buying to property-investing.

Phase 2:  The stations will go live, commuters will start to feel the benefits of the stations, foot traffic will increase, demand will deepen and the area will develop and flourish. This growth involves lifestyle changes and increased population, which leads to higher prices. The areas with the greatest drops in journey times to Central London will see the greatest changes and growth.

Below is a table to demonstrate some Phase 1 growth statistics. For example, growth in Reading in the last 7 years has been twice the UK average. More central areas such as Whitechapel and Acton have seen a “double growth effect” with a bounce back from the 2009 crisis and Phase 1 of Crossrail growth. Highlighted in red is the anticipated five year growth as a result of Crossrail 1.

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Old Oak Common – Set to become London’s Busiest station by 2026

Old Oak Common is an enormous renovation project opening in 2026, a project that forms part of the UK’s largest station building programme since the Victorian era. Old Oak Common Station is set to undergo a £1.3 billion renovation designed by WSP UK, who have previously worked with projects such as the Shard. The super hub will provide connections between HS2, Crossrail, the Great Western Railway and London Overground and is expected to bring as many as 25,500 homes and 65,000 new jobs to the surrounding area, which will fuel the UK economy with £7.6 billion each year. Due to be ready by 2026, the station will be one kilometre in length, 20 metres below ground and will host 8 platforms. The station is also an essential part of Heathrow Airport’s plans for expansion, as it will connect major cities with the Elizabeth Line.

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FCT Strategy for Long Term Capital Growth and Assurance on Returns

  1. Don’t follow the herd without prior research. Investing by imitating the behaviour of other investors is far riskier than educating yourself on the necessary facts and figures specific to the property in which you wish to invest.
  2. Prime location within a radius of transport links, restaurants, green space, shops, as well as the style of neighbourhood in which a property is based will all impact how well an investment will fare in the long-term. This can include proposals for future additional elements to a location, such as infrastructure plans.
  3. Fundamentals – Take note of sentiment but focus on the fundamentals that are unlikely to change, such as supply and demand, focusing on long-term capital growth and yield, and a prime location. It is unwise to jump into an investment because of personal emotions connected to an area or a property itself as opposed to a logical, detached perspective that focuses on the investment fundamentals.
  4. Infrastructure hotspots – Crossrail and HS2 are investment strategies that should not be missed – infrastructure hotspots like the surrounding areas of Old Oak Common are set for future growth. You only need to look at historical trends to see the potential long-term yield from infrastructure projects like these.
  5. Do your due diligence – It is really essential to best inform yourself when information about the property market is so easily accessible. Check prices of surrounding properties to get a feel for the general price mark in the location. Ask the vendor for their professional opinion on which properties are best to compare to one another. At the end of the day, it is you who is purchasing the property, meaning you are at the greatest vantage point when you have all the possible information – be certain that you are happy with everything that the property offers.

Golden Opportunity for Foreign Buyers Ahead of Speculated Stamp Duty and Expected Currency Changes

By Investment Advice No Comments

Following the outcome of a huge majority Conservative win in December’s election, the uncertainty of Brexit and the future of the British economy is subsiding and optimism for the year ahead is fuelling a rush of overseas buyers keen to snap up on London property before the proposed 3% surcharge on stamp duty and probable strengthening of the pound.

The government has set the 11th of March as the date for the budget when Chancellor of the exchequer, Sajid Javid, will announce the changes in stamp duty. At the end of last year, Boris Johnson proposed an additional 3% for foreign buyers of UK property, so now may be the window for overseas investors to grab their properties ahead of the change to avoid this surcharge. The 3% increase is estimated to affect up to 70,000 transactions a year and raise £120m in revenues that could help address the problem of homelessness in the UK.

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The massive win for the Conservatives in December with their pro-Brexit leader has caused a surge in optimism in the property world. Simon Lyons from property development group Enstar Capital says:  “We now have stability and that counts a lot with foreign investors as they know they are not in for any surprises over the next decade.”

The London property market remains a reliable and relatively stable option with regard to capital appreciation over the long-term, and the subsidence of political uncertainty is expected to boost the market and work as a catalyst for Central London house prices over the next five to ten years. This, in addition to a currently favourable exchange rate, is urging foreign buyers to make their move in the limited time window before prices rise and the pound increases again now the uncertainty has passed.

Lucian Cook, director at Savills Residential Research, predicts a major influx of foreign investors looking to purchase property before the budget’s changes, believing that the value of the pound is an added incentive.

The pound’s volatility has been directly linked with Brexit negotiations, with the immediate aftermath of the referendum seeing the pound decline sharply and the Conservative win in December 2019 caused a surge. The expectation, therefore, is that the pound will fully recover as we reach milestones in the Brexit process. With new control in Parliament and the potential for a 3% increase in stamp duty by April, buyers are abandoning the wait-and-see approach necessary during Brexit uncertainty and making a rush for London stock in this window of opportunity.

That all being said, London’s 3% stamp duty surcharge is still more accessible for foreign investors than a vast number of other cities in the world, including Hong Kong with its hefty 30% total tax for foreign buyers, and Ontario with a 15% ‘non-resident speculation tax’. And with a surge in foreign investment, London property prices will continue a steady, reliable growth, providing buyers with a worthwhile and secure investment for the long-term, particularly with other future plans like Crossrail set to open in 2021.

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Sources:

https://www.ft.com/content/0a27712a-0d2b-11ea-b2d6-9bf4d1957a67

https://www.buyassociation.co.uk/2020/01/09/overseas-buyers-to-snap-up-uk-property-ahead-of-stamp-duty-changes/