Strong fundamentals in London residential market

Strong fundamentals in London residential market

Prices are unlikely to fall

The Tower Bridge is seen from the London Tower. Following the deep depreciation of the pound, London housing prices in baht terms dropped by 18% from the June 23 Brexit vote to Oct 31 this year. (Photo by Suphaphan Plengmaneepun)
The Tower Bridge is seen from the London Tower. Following the deep depreciation of the pound, London housing prices in baht terms dropped by 18% from the June 23 Brexit vote to Oct 31 this year. (Photo by Suphaphan Plengmaneepun)

Since the Brexit vote, many high-net-worth Thais have shown keen interest in investing in the London residential market and there is never a better time to take the plunge now, according to property consultant JLL.

Despite rising investment interest, most of these investors have continued to adopt a wait-and-see approach, wondering if London residential prices will drop. However, in the pound term, prices have stayed flat and are unlikely to fall in the foreseeable future, according to the latest report by JLL.

“For many years, the London residential market has been one of the most attractive investment destinations for many high-net-worth Thai individuals looking to invest overseas,” said Suphin Mechuchep, managing director of JLL in Thailand. 

“Following the deep depreciation of the pound, London housing prices in baht terms dropped by 18% from the June 23 Brexit vote to Oct 31 this year. This has made London even more attractive in terms of pricing. An increasing number of enquiries from Thais looking for investment opportunities in the London residential market explains the case.

“However, only a small number of these Thai investors have made a decision to purchase so far. Most of them remain sceptical about the London residential market outlook post-Brexit,” says Mrs. Suphin.

David Green-Morgan, JLL’s Global Capital Markets Research director, said: “Right now, it’s important for investors to trust their instincts and watch the fundamentals. Based on our data, we believe there are more reasons to buy and hold than sell when it comes to London property.” 

First, London is underprovided in housing, especially below the £2-million mark. Government figures estimate that there will be a large annual shortfall between supply and the forecast 20-25,000 housing units needed each year for the next four years. 

Second, London is now one of the world’s most important technology hubs with the technology, media and telecom sector being the biggest new occupier of office space in the last seven years. This means that more people are moving to London to work. In fact, the city’s population is set to rise by almost a million by 2020, creating further demand for housing.

Furthermore, according to a wide range of indices, London tops the rankings in terms of business environment, financial-sector development, infrastructure, human capital and overall reputation as one of the top cities in the world. The UK’s flexible monetary and fiscal policy has made it a target for global capital, creating economic growth and employment across a number of sectors.

Besides, the UK economy, which has grown strongly in recent years, is forecast to outperform the rest of Europe and the euro zone, despite Brexit. Rumours from the government indicate that the Chancellor of the Exchequer’s autumn statement in November will provide an additional economic boost.

The devaluation of the pound, though at historic lows against many Asian currencies, could also offer a once-in-a-generation entry point for new and experienced investors. The weak pound is unlikely to last for a sustained period of time. Compared to other developed markets -- including Hong Kong, Sydney and Singapore -- London is competitive in terms of transactional and holding taxes. 

The situation will evolve, but irrespective of the outcome of negotiations with the EU, the UK will continue to be one of the most important economies in Europe and globally.

Despite London’s housing market being more vulnerable to downside Brexit risks, JLL expects house price growth will outperform regional counterparts over the next five years. A sharp collapse in housing starts in 2017-18, especially in central London, will result in a disparity between demand and available supply leading to strong upward pressure on prices once confidence returns.


The full research report by JLL can be download at www.jll.co.th

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