Prime London property ‘solid gold’ investment
03-04-2014
Values of prime London homes will rise 10.1% in 2014, higher than gold and shares, which is likely to attract more overseas investors, says Chesterton Humberts
The value of prime London residential property is set to outperform gold and shares in 2014 and increase by almost half over the next five years, a top international agent predicts.
Capital values on prime London homes will rise 10.1% during 2014, better than the FTSE 100 Index (up 7.8%); gold – ($ per ounce, up 1.4%) and Brent Crude (down 3%) and over the next five years, values will rise 48.5%, predicts Chesterton Humberts.
Prices are being driven up by increased demand, including from foreign buyers, who are not likely to be put off by the new Capital Gains Tax, says Head of Research, Nick Barnes.
“Overseas investors will continue to predominantly target apartments within new developments to add to their investment portfolios, whilst growing confidence that the economic recovery has taken hold will bring more domestic buyers to market.
“There is certainly a compelling case for investing in residential property in Prime London. Its long term track record is impressive, having delivered strong capital growth together with low volatility compared to equities and commodities whilst displaying low correlation with other mainstream asset classes. This has already attracted a wide range of prospective buyers.
“Looking ahead, demand is likely to continue to outstrip supply which will sustain capital growth whilst the private rented sector is forecast to expand further as the economy picks up and labour markets improve, thus providing more opportunity for steady rental income.
“Furthermore, with no further taxes proposed on high end property, bar capital gains on non-resident owners, I expect demand from investors will continue to rise for the foreseeable future – assuming we do not see any unforeseen economic or financial shocks. Whilst it is less liquid than equities and commodities, it is an ideal longer term investment portfolio balancer.”
Values of prime London property rose 11.3% in 2013, slightly higher than in 2012, as demand remained strong from foreign and domestic buy-to-let investors and owner occupiers. Appraisals, viewings and exchanges all recorded double-digit growth during the year, according to Chesterton Humberts’ Prime London Residential Sales Report for Quarter 4, 2013.
Equities are expected to rise as the economy picks up, but at a slower pace than prime London property. Gold faces greater uncertainty as global economies appear to stabilise, whilst oil prices are predicted to fall as demand declines from major importers.
“Overseas buyers will continue to be attracted to London for its safe haven status and the strong long term performance track record of the prime market, while the forecast slight strengthening of the pound will be an annoyance rather than a deterrent,” says the Prime London Residential Sales Report.
Humberts Chesterton says the government has punished the property sector enough in higher taxation and should turn its attention to big business instead.
“In contrast, government policy towards the prime residential market has been punitive rather than supportive. The introduction of new and higher taxation of prime residential property has so far largely been absorbed by the market; however, it may have sown some seeds of uncertainty with regard to what may come next.
“London has already seen its share of national Stamp Duty Land Tax revenue rise over the last 15 years from just fewer than 30% to just over 43%. This is especially true among overseas purchasers although domestic buyers have also been affected by increases in SDLT, while owners are anxiously awaiting further news about the possible introduction of a Mansion Tax.
“Even expatriates who have retained a home in the UK are concerned about the whether the proposed extension of capital gains tax to non-resident owners will apply to them.
“If the Government wishes to pull in additional tax revenue they might be better engaged in pursuing the large conglomerates which appear not to be paying their “fair share”.
In addition to UK offices, Chesterton Humberts has 21 offices around the world, including St Tropez, Gibraltar, Mallorca, Umbria, Tuscany, Singapore, Moscow, South Africa, Abu Dhabi, Sydney and Brisbane.
By Adrian Bishop, Editor, OPP Connect