Prime central London properties continue to attract well-heeled investors, increasingly from Asia, as the British capital remains one of the few markets showing a sustained capital appreciation in a muted global economy. Prime London properties are viewed as a safe and secure investment haven.
LOOKS FAMILIAR: Designers of Fitzroy Place site in London incorporated the facade of a British government-designated heritage building into the design of the new development (in the background).
London developers have exhibited their projects in Hong Kong and Singapore for many years and with a growing interest among Thai buyers and investors, many developers are now exhibiting in Bangkok. This month several London properties are being promoted in the Thai capital.
To understand the potential of a new property market, it is easiest to look at a familiar market such as Bangkok and compare the similarities and differences to the London market. The first basic fundamental to understand about any market is the location.
Central London and Bangkok are similar in that the heart of the city is characterised by a scarcity of supply which attracts the highest prices and records the highest growth in capital values. The central areas are the key prime locations, and include Mayfair and the West End, Kensington, Chelsea and Knightsbridge. London's Mayfair is akin to Bangkok's Ratchadamri.
As in Bangkok, the prime areas in London are defined by proximity to mass transit, in particular the city's underground public transport system. The location of a property is often viewed in relation to the distance from the nearest tube station, which station it is and which zone it is located in. Zone 1 of the underground system covers the prime central London areas mentioned and Zone 2 represents the fringes of central London. With the extensive use of underground transport, its relevance to the property market is significant.
The scarcity of new supply is highly evident in the prime central areas. In 2011, only 50 new units were completed in the Kensington and Chelsea areas with only 322 finished in Westminster. Opportunities for new developments in these areas are extremely rare, with very few exceptions of sites that have been earmarked for redevelopment such as Fitzroy Place. Occupying a whole block between Euston Road and Oxford Street, Fitzroy Place is located in the heart of London and is just a short walk from Oxford Circus and Regent Street.
Like Bangkok, the London market is divided and delineated by the river that created the original city and both city's business districts are located north of their respective rivers. South of the Thames, London's Southbank, Vauxhall, Battersea and Nine Elms are recognised as regeneration areas that are going through significant changes. Similarly, the development of the Thon Buri side of the Chao Phraya River mirrors the less valuable South Bank in London which offers opportunities for residential redevelopments. Large-scale redevelopment opportunities and new projects are beginning to change the status and relevance of the locations.
While regeneration areas do not have the same value as properties in prime central London, there are pockets of prime areas that feature new superior projects. As in Bangkok, prices south of the river in London are lower than in prime residential areas, but there are particular projects such as The River in Bangkok and The Tower, One St George Wharf in London which offer a height premium and also a significantly more sophisticated level of facilities and services than the typical new development. Riverside developments also offer more in terms of views, but few offer panoramic views from all units, with the exception of projects that offer the height premium.
Moving on from location, other factors to consider are exclusivity, the quality of construction, specifications, facilities, services, the surrounding environment and the experience of the developer. The exclusivity factor is an important element to consider and bears on pricing. Investors should consider projects with fewer units, ideally fewer than 250. The larger the project, the more competitive the future resale and rental will be and the less exclusive it is.
There are many factors to consider when purchasing overseas. Buying an overseas property at an exhibition is not common in Thailand, therefore investors considering buying in London should do their research well ahead and know what factors to consider to make a financially sound investment decision.
Buyers should also know what questions to ask and not take everything outlined in the marketing materials and glossy brochures at face value. In marketing, any project's agent will showcase the best aspects, but as an investor you should also do your homework, and consider consulting a reputable full-service property firm.
Details such as the project location, particularly if you are unfamiliar with the market and areas of London, the unit specifications and views should be checked. For example, distances quoted from the project to key facilities should be checked. The right questions must be asked to ensure the marketing messages are interpreted and understood correctly.
However, decisions should be made quickly as units do move quickly during overseas roadshows that are often organised back to back in multiple locations. It is not often that Bangkok gets the first pick of units before traditional buyers' markets such as Hong Kong and Singapore, but in the case of Fitzroy Place, the project will be launching its last and best phase in Asia for the first time in Bangkok at the end of October.
In any market, buying the best product in the best location is considered the safest investment. In Bangkok, top-quality projects in prime locations such as Athenee Residence and The Park Chidlom have demonstrated the ability for a profitable resale with significantly higher capital values and ongoing demand.
The same goes for London. You should buy the best you can afford _ not the largest unit you can afford in an inferior location; hence doing your research and homework thoroughly is essential to making the right decision.
David Simister is the chairman of CBRE Thailand. He can be reached at firstname.lastname@example.org; Twitter: @CBREThailand; Facebook: www.facebook.com/CBRE.Thailand.
About the author
Writer: David Simister