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Saturday, September 26, 2009

Upswing mood on prime London properties

LONDON: In view of the current residential market in London, some local property investors are now eyeing for upscale properties at London in anticipation of the substantial investment gains out of these prime residential properties located outside our home ground.

Some local buyers have recently snapped up a number of luxurious apartments and penthouses at Imperial Wharf, London with a minimum estimated sales of £9.24 million (RM56 million) generated during its 2-day launch in Kuala Lumpur.

Developed by one of London's leading residential developers St George Central London Ltd (St George), the prime riverside development Octavia House at Imperial Wharf, London has seen 32.5% (28 units) of its 86 apartments and penthouses, offered at prices starting from RM2 million to RM23 million taken up during the launch.

In addition, sales and marketing manager of St George, Neil Bowron said: “The weakening of pound, coupled with the fact that the Olympics Games is going to be held at London in 2012- has further generated interest as an attractive investment worldwide.”

Having said that, the developer which also aimed to penetrate the Hong Kong and Singapore market with the same property launch in September, managed to set an overall high sales record of approximately 98% out of the total 165 apartments and penthouses at Octavia House offered to investors and homebuyers.

With sizes ranging from 903 sq ft to 3,532 sq ft, these units which are located in a prime London residential location, on the north bank of the River Thames and adjacent to fashionable Chelsea, says the developer.

Bowron said: “The reason why we chose Kuala Lumpur as one of our overseas target markets is due to the increasing demand we have seen over the years among Malaysian investors on prime London properties- around 40% of them bought as results of their children pursuing tertiary education in London.”

By the time their children graduated in the span of few years, investments gains out of capital appreciation may easily cover at least half of the education fees, or in some exceptionally good investments, these could even exceed the total education cost forked out by the parents.

In addition, “Local buyers who are non UK residents are exempted from UK's capital gains tax, the same applies back here where Malaysian residents are also exempted from capital gains tax upon disposal of properties located out of Malaysia under the Malaysia's Real Property Gains Tax Act 1976,” said Chow Chee Yen, the executive director of international tax at Malaysian-based consulting firm Advent Tax Consultants Sdn Bhd.

Ross Faragher managing director at St George commented: “Overseas investors will have the opportunity to capitalise on a 25% currency savings since Summer 2008 and the UK’s lowest base lending rate for decades.”

“Investors should capitalise on the current low base interest rates and currency exchange rates in the UK. It is now a good time to buy prime properties in London,” Bowron said, noting that the apartments located in prime locations in London could generate an average rental yield of 4% to 6% per annum.

According to a statement issued in September 2009 by Jones Lang LaSalle at UK (Jones Lang): “The UK's base rates remained unchanged at 0.50% for a sixth consecutive month in September.”

“The Bank of England is expected to keep interest rates at this level into 2010 whilst continuing its quantitative easing (QE) programme,” said Jones Lang.

In addition, Liam Bailey head of residential research at Knight Frank said, “The real test to the market will come when interest rates rise in either 2010, or if we are lucky 2011. The special impetus on very low interest rates will not last forever and the medium term outlook is probably less positive for the market.

Bailey added that the weakness of pound at the start of this year aided the recovery of demand in central London, set against continuing tight supply- by March, its prices had fallen almost 50% in US dollar terms.

“The sales taking place in London for the first three weeks in September was 75% higher than the same period last year, and we expect tight supply for the remainder of this year,” Bailey said.

In terms of prices, Bailey noted: “The 1.3% price rise for residential property at central London in September is the sixth month in a row, we have experienced positive price growth.”

Despite this recent growth, Bailey said prices are still 18% below their March 2008 peak and represent 8.9% lower than they were 12 months ago.

The strongest areas have been Chelsea, Kensington and Notting Hill, where prices have risen by between 8% and 9% since March, he added.

Although Bailey suggested that these price increase may be short term, the key drivers of price growth remain: tight supply of properties, very low interest rates for cash-rich buyers and strong overseas demand for central London properties.

Surprisingly, Bailey said since the market improvement in April, it has been the lower end of the market which has led the recovery.

“Prices in the £1 million to £2.5 million market have risen more than 5% in the last three months, compared to only 2.4% for houses priced £10 million and above market. Houses continue to outperform flats - with three-month price growth up by 4.6% and 3.6% respectively,” he cited.

That said, James Pace a partner and head of Knight Frank Chelsea noted: “Properties (in London) that are well-presented, in good locations and priced correctly will continue to do well, whilst properties that is compromised will lag behind.”

By The Star (by

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