Samir Salya looks at overseas investment in London real estate

A new report shows that overseas investors own 13 per cent of homes in London. That equates to just over one in ten of all properties sold in the city.

The report was commissioned from the London School of Economics and York University, by the Mayor of London and uses data from all property sales between 2014 and 2016.

Interestingly, the report showed that foreign investors bought 33 per cent of all new build homes in the most exclusive areas of the city. But they also account for almost 16 per cent of transactions made in inner London, and six per cent of those made on the outskirts of the city.

No evidence of ‘lights out’ syndrome

The assumption that a lot of properties in London are routinely left empty by overseas investors was found to be unlikely. According to the findings of the report, there is “almost no evidence” of new build homes bought by foreign investors left with no occupancy for any length of time.

Instead, the report suggested that the assumption that there are lots of homes owned by foreign buyers sitting empty may derive from the time lag in filling units once new build developments are completed. It says: “There may be an inaccurate perception that units are empty because the private units in a development will usually complete construction sometime after the affordable homes, giving a mistaken impression of vacancy.

“Further, once large developments are complete, it can take up to two years for occupancy rates to build up, and so homes may be vacant for an initial period before being lived in full time, which may account for perceptions that homes are left empty.”

Higher priced units more likely to be empty

Despite the findings that fewer properties are typically left empty, the report did show that higher value property is more likely to be empty for part of the year. Higher rates of vacant property were found in prime real estate in London, homes worth more than £5 million and homes owned by foreign buyers.

The report said: “Homes bought by overseas buyers were much more likely to fall into this group compared with ones bought by UK buyers, with higher inferred under-occupancy rates for such homes compared to homes owned by UK buyers.

“This does not mean that these homes are empty, but rather that they did not exhibit the characteristics that would be expected of homes occupied full time.”

However, the report also showed that overseas investors are more likely to buy lower value property than high end homes. More than half of all sales to foreign investors were worth between £200,000 and £500,000, just about a third were between £500,000 and £1million and 16 per cent at the higher end between £1 and 5 million. Only one per cent of all transactions were worth in excess of £5million.

About Samir Salya

Samir Salya is the Chairman of Reign Holdings, and is involved in UK and UAE real estate and construction. Samir holds over 20 years’ experience in executive management, business expansion, performance improvement, sales and marketing.