Foreign buyers are changing their preferences in UK housing market as pandemic stokes recession risks

By Cheryl Arcibalcheryl.arcibal@scmp.com / https://www.scmp.com/business/article/3085068/foreign-buyers-are-changing-their-preferences-uk-housing-market-pandemic?utm_medium=partner&utm_campaign=contentexchange&utm_source=EdgeProp&utm_content=3085068 | June 2, 2020 2:54 PM SGT
Overseas investors are going for completed units in tried-and-tested locations in the UK residential market, avoiding those under construction because of the threat of economic recession, some analysts said.
The trend is particularly evident in London and homebuilders are recognising the shift in the time of coronavirus pandemic by recalibrating their plans to suit the market appetite and behaviour, they added.
"The proportion of buyers looking for completed units has increased to nearly half of all enquiries currently," said Victoria Garrett, head of residential, Asia-Pacific, Knight Frank. "During this period of uncertainty, it is a trend we can expect to continue."
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The shift underpinned a surge in new homes in England last year, where 250,552 units were delivered to owners, the first time it has surpassed the quarter-million mark since the 1970s, according to data compiled by Savills. Demand has increased amid a rush to beat higher cost of ownership from April 2021.
Apart from economic concerns, buyers are more likely to purchase "camera-ready completed units" during the pandemic, as both buyers and sellers are forced to conduct viewing, negotiations and transactions online, Garrett said.
In London, cost is another reason. Under a plan announced in March, the UK government will collect an additional two per cent of stamp duty from non-resident buyers from April 2021. That could continue to fire up sales volume in the city as the deadline approaches, according to JLL.
Given the economic uncertainty, developers might also be keen on unloading existing stock, according to Ed Lewis, head of London residential development sales at agent Savills. They are likely more willing to give discounts to entice investors, more so for schemes that have been completed for more than a year.
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The current low interest rate environment and the cheaper pound sterling have also made purchasing a completed unit more attractive. The British currency has weakened 7.5 per cent against the US dollar this year, after a 4 per cent gain in 2019.
Before the global pandemic, agents noted that buyers were enticed by the long-term prospects of homes in regeneration sites in London's outer districts. As social distancing measures delay construction, potential buyers might be concerned about the delay in taking over their unit.
The UK government imposed lockdown measures from March 24 and only began to ease some restrictions on May 10.
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"The landscape has changed and with Brexit, stamp duty reforms and more recently Covid-19, investors are looking for a different type of home and location," said James Lane, head of sales at listed property company Capco. "Buyers have peace of mind that their home will not be delayed should there be new guidance from the government on social distancing for construction."
Other buyers are becoming cautious even with the location of their prospective homes, and are looking at popular districts in London, according to Richard Leslie, chief executive officer of Dukelease, which focuses on prime central London market.
They are dialing back on riskier locations and have returned to established areas in central London, which are internationally recognised, where demand keeps up with supply, he added.
"Rarity rather than 'up-and-coming' now offers the best opportunity for strong and stable long-term yields in the UK," Leslie said. "There is a lot of development and just as much competition so it's inevitable that developers will be rethinking their strategies going forward to consider smaller projects in line with buyer appetite."
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.
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