Some investors see opportunity in UK amid lingering uncertainty
By Cecilia Chow
/ The Edge Property |
Since early September, there has been a series of UK property launches in Singapore. One of the first was Atria, a development with 128 apartments — mainly a mix of studios and one- and two-bedroom apartments — by Galliard Homes. The project, marketed by JLL in early September, is near the Slough town centre, and has units priced from £182,500 ($319,000). “Slough is located outside London and near Windsor Castle,” says Adam Challis, JLL head of UK residential research. “Slough is undergoing regeneration, however, and will benefit from the Crossrail. It represents great value.”
This project was followed by the launch of London City Island, a 12-acre riverside development on Leamouth Peninsula near Canary Wharf. London City Island is one of three London developments in which Malaysian property developer Eco World Investment Co acquired a 75% stake last year in a joint venture with Dublin-based Ballymore Group. The other two projects are the second phase of Embassy Gardens in Nine Elms near Battersea Power Station and Arrowhead Quay in Canary Wharf. Eco World pumped in £429 million in equity to acquire its stake in the three projects, valued at £2.2 billion when completed.
Marketed by JLL, London City Island was showcased in Singapore at Eco World’s sales gallery on Tanglin Road on Sept 11. The launch came ahead of the Singapore Grand Prix on Sept 18. In keeping with its UK theme, the sales gallery was festooned with the Union Jack and refreshments were provided by the British Club in Singapore. On display was an Aston Martin Vantage 8. Some guests mistakenly thought the grand prize was the marque long associated with James Bond. “If we buy a unit in the project today, does that mean we get to drive off with this car?” enquired a Singaporean as her 10-year-old took the driver’s seat. She was quickly assured that it was for display only.
The seminar on “Britain after the Referendum” with presentations by Christopher Pook, regional director for the department for international trade and the FCO Prosperity Network in Southeast Asia at the British High Commission, as well as JLL’s Challis on the UK housing market, drew close to 40 attendees.
Pook (left) and Challis meet guests at the Eco World sales gallery on Sept 1
The Aston Martin Vantage 8 on display at the sales gallery of Eco World during the launch of London City Island
Mixed response
Response has been relatively mixed at recent UK property launches. The weekend of Oct 1 and 2 saw the launch of Hampstead Manor by Knight Frank and CBRE at the Four Seasons Hotel. Hamstead Manor is a 125-unit luxury residential development in a series of 12 buildings, which include Grade II listed, sensitive conversions and new builds. The project, located on Kidderpore Avenue, is said to be close to the centre of Hampstead Village and West Hampstead. Developed by Mount Anvil, the project is scheduled for completion in 2Q2018.
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“Most of those who attended the weekend exhibition were genuine buyers and they know the location,” observes Stephen Ho, CBRE Singa pore’s director of international project marketing. “They are still looking to buy, but they are very particular about what they want. And they want to buy in a location that they know well. Gone are the days when people would buy something sight unseen and without knowing the area.”
The weekend of Oct 1 and 2 saw the launch of Hampstead Manor by Knight Frank and CBRE at the Four Seasons Hotel
That weekend also saw the launch of two London projects: The Music Box and Onyx Apartments, which were marketed by Colliers International. Both projects were said to have seen relatively brisk sales last weekend.
Despite the uncertainty surrounding Brexit, some of the recent London property launches have seen relatively good sales, says Vanessa Chan, JLL associate director of international residential property services. “It could be partly owing to pent-up demand, as even before the Brexit referendum in June, the number of property launches from the UK had already slowed. Response has been location- and product-specific.”
Developers of off-plan, newbuild properties have already been hit by the changes in the stamp duty in the UK since last year, and now by the uncertainty around Brexit, says Camilla Dell, managing partner and founder of independent London buying agency Black Brick. “They were catering to the overseas buyer, and that market has dried up significantly.” She therefore sees many developers now trying to focus on selling existing stock, with some rethinking future developments and deciding not to build, or to change planning consents to much smaller studio and one-bedroom units, where demand is strongest.
UK developers have therefore scaled down on their overseas property launches amid more muted response since last year, says Phylicia Ang, Savills Singapore’s head of residential sales and Prestige Homes. “When launching in Asia, they now choose to launch in just one city — either Hong Kong or Singapore, and not in both cities as they used to do,” she adds. “Hong Kong has been the preferred choice of late because they feel buyers there are more decisive, whereas Singapore investors tend to be a bit more cautious.”
Dell: If you can find a good opportunity in today’s market, don’t wait. It’s a bit like the Harrods sale — you don’t want to go on the last day when all the good things have been sold already.
Finding good opportunities — a challenge
Recent falls in property prices in Prime Central London are bringing prospective buyers back to the market, and the drop in the value of the British pound since the Brexit vote is making UK assets particularly attractive to overseas buyers.
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“For all the renewed interest, however, our clients remain concerned that the market may have further to fall,” says Dell. “No one wants to overpay for a property and, amid continuing market uncertainty, many of our clients are looking ahead and asking whether they might be better off waiting for further falls.”
The biggest challenge now is therefore in finding good opportunities, says Dell. Still, there are opportunities to pick up a bargain or distressed sale. “We get offered lots of deals where buyers committed to a purchase a few years ago, and are now being asked to complete it but, for various reasons, cannot afford to do so. They are now willing to trade their unit for less than what they originally agreed to buy it for.”
Her advice to her clients: “If you can find a good opportunity in today’s market, don’t wait. It’s a bit like the Harrods sale — you don’t want to go on the last day when all the good things have been sold already.”
Singapore investors who bought property in the UK when the British pound was 3:1 against the Singapore dollar are also likely to see their gains eroded by currency loss if they were to exit today, as the pound has fallen to a historical low of 1.75 against the Singapore dollar. “We would advise them to keep their gains in pounds so as not to incur a currency loss or they can reinvest in the UK,” says Doris Tan, regional director of Singapore and Hong Kong for Strawberry Star, a London property agency and developer. “But if you had borrowed in pounds, and if you were to sell your property and repay your loan in pounds today, you would lose less than if you had paid for your property entirely in cash.”
That explains why, anecdotally, more than half of Singapore buyers today are first-time investors in London property. “The currency arbitrage of 15% represents an indirect discount for these buyers,” says JLL’s Chan.
Institutional investors still confident
While some individual investors in Singapore may still be adopting a wait-and-see approach over Brexit, institutional investors remain confident in the UK market over the long term. At listed property giant City Developments’ (CDL) results briefing at end-June after the Brexit referendum, executive chairman Kwek Leng Beng said he was “confident that if there are fire sales, I will buy in the UK, whether real estate or hotels”.
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Last month, listed property developer UOL Group announced that it was acquiring a freehold London property for £229.6 million. The 113,256 sq ft property is a nine-storey mixeduse development and located in Farringdon, located within walking distance of the Chancery Lane tube station as well as the Farringdon tube station and interchange on the Crossrail. The property was acquired by a 50:50 joint venture between UOL’s associate company, United Venture Investments and UIC Overseas Investments, a subsidiary of United Industrial Corp (UIC).
At end-September, Singapore’s sovereign wealth fund Government Investment Corp (GIC) acquired a 7,150-bed student accommodation portfolio in the UK worth $1.2 billion, jointly with Dubai-based global student accommodation specialists GSA.
The weakened pound has attracted international investor interest, especially from China, says Chris Pilgrim, director of CBRE for Central London, international capital markets. “The slide in the British pound has swung these investors over.”
Significant commercial deals involving Chinese buyers include the announced acquisition of Ryder Court in St James by one of China’s biggest property developers, China Vanke, for £115 million last month. Meanwhile, China Minsheng Investment Corp purchased French bank Société Générale’s London headquarters for £84.5 million. Country Garden, one of China’s largest developers, signed a preliminary agreement to invest up to US$2.7 billion ($3.7 billion) in Birmingham last month.
Pilgrim: Post-Brexit referendum, the job market remains strong and buoyant, with many sectors still growing
Some MNCs have also expressed their longterm commitment in London, post-Brexit referendum. On Sept 28, Apple announced that it would be the biggest office tenant at Battersea Power Station, and will take up half a million sq ft over six floors of the central Boiler House inside the historic landmark. Apple is expected to move in by 2021.
In June, Google’s new office in London’s 6 Pancras Square in King’s Cross saw 800 engineers moving in, with another 2,000 staff expected to move in over the course of the year.
“In London, unemployment is the lowest in the last 30 years,” says CBRE’s Pilgrim. “Post-Brexit referendum, the job market remains strong and buoyant, with many sectors still growing.” The real shift in the London office- occupier market is that, prior to the global financial crisis, the market was very much dominated by financial institutions. In recent years, however, companies in the creative and tech industries have become increasingly dominant. “London is able to provide a diverse workforce that not many cities around the world can offer on that scale,” he adds.
Housing shortage remains
The UK population has grown to 65 million this year, with the population in London at 8.7 million. There is still a housing shortage, says JLL’s Challis. “We have 50,000 new households a year, and we are building just 20,000 new homes annually. It’s a perennial problem that hasn’t been dealt with properly.”
Meanwhile, in Singapore, investor interest remains selective, says Savills’ Ang. “Most investors are looking for good prime properties at good discounts, and some of them are eyeing property in prime Central London, where prices have softened in the wake of the higher stamp duties.”
This article appeared in The Edge Property Pullout, Issue 749 (Oct 10, 2016) of The Edge Singapore.
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