Residential property in the United Kingdom (UK) is and always has been attractive for Singaporean investors. Much of the interest from local buyers stems from their affinity with the UK; it presents no language barrier, has efficient tax policies and a transparent legal system.
The UK is also home to several of the world's most renowned universities, making it a worthwhile destination to consider when deciding on your children's education.
Its reputation for being a 'safe haven' and an attractive location for capital growth makes the UK's prime cities exciting to explore. This is reinforced by the strengthening of the Singapore dollar, low interest rates, and stable rental yields.
The charm of living in a country with world-class cultural facilities, a stable political environment, and positive foreign investment policies gives property investors reason to gravitate toward this global hub.
50 Shades of Grey, and London remains attractive
London is the fastest-growing city in Europe, with a population of just over 8.6 million. Its property market enjoys significant demand from affluent and middle-class Singaporeans. According to the Colliers International's Global Investor Sentiment Report, Singaporeans are the top foreign investors in UK property; London was favoured as the top investment destination in 2014.
With the Singapore dollar strengthening against the pound, the UK presents an exceptional opportunity to capitalise on and expand your portfolio. High capital and rental yields, together with a strong year-on-year performance, are key drivers of London's property demand.
According to international real estate advisor Savills, Prime London's rental market demand saw growth of 1.8 percent in 2014. The strongest rental growth was recorded in Central London (3.5 percent) and East of City, encapsulating Wapping and Canary Wharf (5.1 percent).
Properties in these areas provide easy access to the financial service centers of Canary Wharf and the City, as well as to the tech centers of East London.
Savills noted that London's commuter belt saw the strongest annual growth, with average rents rising 2.7 percent. Towns such as Guildford, Tunbridge Wells, and Winchester saw the highest growth, due to their popularity for schooling and easy access to the city.
Savills expects rental growth to remain strong over the next five years, with Prime London at 17.7 percent and the Prime commuter zone at 18.9 percent cumulative growth rates.
Singaporean investors are also attracted to London's new-build market. Property consultancy London Central Portfolio highlights the average price in Prime Central London is £1.64 million (S$3.4 million), a leap of 10 percent over the past four quarters.
Prices in Greater London are also on the rise, with an annual growth rate of 8.5 percent, bringing the average value to £530,000 (S$10.69 million). Construction of the highly anticipated Crossrail train line has strengthened property prices near the new transport link by 30 percent since the project was announced in 2008.
The general election and the UK property market impact
The influx of overseas investors into the UK property market is, however, making local buyers feel priced out. Residents are facing a housing shortage as foreign buyers drive up home prices and snap up homes designed for locals.
High prices are leading local first-time buyers to look for housing opportunities elsewhere, in cities such as Glasgow, Leeds, and Manchester.
The UK government is proposing measures to curb the number of foreign property investors. Experts believe the general election in May 2015 will be a turning point that could bring about changes in the UK property scene.
The UK government plans to impose Capital Gains Tax (CGT) and is in talks to introduce a 'mansion tax'. Details of how or when these regulations will be implemented remain vague.
Despite this, the market continues to draw investors. The UK's property regulations remain favourable to non-UK residents and non-UK domiciled investors.
Mirroring this sentiment is findings from the iProperty Asia Property Market Sentiment Report, which identified the UK as one of the preferred investment choices for overseas property investment.
The unabated interest in UK property stems from its combination of stable yields, diversified demand, favourable exchange rates, and attractive foreign investment frameworks. Together these key factors ensure UK residential property remains an attractive opportunity.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Singapore Business Review. The author was not remunerated for this article.
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Sean Tan is Singapore General Manager and Chief Business Development Officer at iProperty Group. He has extensive overseas exposure and has worked in several multinational and cross-culture corporate environments. Sean holds a Master of Project Management from the University of Adelaide, Australia.