The fall in pound post-Brexit provides a unique window of opportunity for Malaysian purchasers. Good news - Knight Frank's UK Property Showcase is this weekend!
Properties in and around London are evergreen investments - Plenty of economic and political fluctuations have come and gone over the years, but property values in this global top financial centre have remained solid, says Dominic Heaton-Watson. In an exclusive interview, Dominic tells Reena Kaur Bhatt why Malaysian investors should strike while the iron is hot.
Dominic Heaton-Watson (Senior Manager, International Project Marketing-Residential, Knight Frank Malaysia)
"Generally, many of the characteristics that make London so attractive to property investors are largely non-reliant on an EU membership – the culture, heritage, transport infrastructure, education, transparent legal system and safe-haven status are all firmly in place."
How has Brexit affected the local market?
Admittedly, there was some degree of caution with the Brexit result but in reality, it has been the increase in stamp duty (on second homes) that has had more of an impact on the residential market. One could argue that perhaps the growth rate seen in London in recent years had become somewhat unsustainable, so a correction in the short term can be viewed as a positive thing as it encourages prices to return to normality. Any perceived uncertainty surrounding Brexit is likely to remain until further clarity is provided on the UK-European Union (EU) relationship.
What are the perks for foreign buyers?
On the plus side, this uncertainty breeds opportunities for foreign investors – the UK Pound has significantly weakened against most major currencies post-Brexit. For instance, in January 2016, the Pound was fetching an average of RM6.30, the current figure (as of 9 October 2017) is 12% lower at RM5.54.
During uncertain times, developers are keen to maintain sales figures and quite a few are offering attractive discounts and promotions. This is a ‘once in a blue moon’ opportunity, so Malaysian buyers would want to take advantage of these new deal margins.
Moreover, Brexit spells a new dawn for foreign investment; it will prompt the UK to be more open and trade-friendly with global partners.
In fact, 2017 has seen a number of high profile investments, all which demonstrates continuous confidence in London:
- Google has taken 365,000 sq ft of office space, to accommodate 2,000 staff
- Amazon is set to take 430,000 sq ft of office space (5,000 staff)
- Facebook will take up 217,000 sq ft of office space (circa 2,000 staff)
- Deutsche Bank and Thompson Reuters’ to expand their London offices
Take note that these represent 14,000 new jobs by end of 2017 from just 5 employers.
Further good news - Late last year, Apple announced that it will be moving its UK headquarters to Malaysia-owned Battersea Power Station, taking up 500,000 sq ft of office space. These examples testify the growing number of ‘knowledge and tech’ workers migrating into the London market, all whom could be future tenants.
The current severe shortage of housing in London plays to the advantage of foreign investors too - this imbalance will take a significant time to correct and is a solid fundamental which underpins sustainable house price growth over the medium term.
What are the London hotspots Malaysian investors are looking at?
When property hunting in London, most investors would look out for supporting transportation infrastructure, as locals very much depend on public transportation. Just as how around the MRT stations in the Klang Valley are being snapped up; Zone 1, 2 and 3 of London is receiving renewed interest, thanks to the upcoming ‘bigger and better’ Elizabeth railway line. Formerly known as Crossrail line, the new line measuring over 100km long from Reading and Heathrow in the west to Shenfield and Abbey Wood in the east will see 10 new stations and upgrading of its existing 30 stations.
“Quite a few Malaysians are seeking out residential properties in Zone 3 or west London, which can command a notably higher rental yield than the prime central zone 1 due to the former's considerably lower entry point. As a very general guide, prices in Zone 1 can average approximately £2,000 PSF, followed by £1,200 – £1,500 PSF in Zone 2 and £700 - £900 in Zone 3.
Zone 3’s popularity has grown tremendously – Not only because of its cheaper price tags; a typical one-bedroom apartment in Zone 3 is much closer to the £450,000 mark while its prime central London counterpart can sell for £850,000 onwards, but also the upgrading in rail linkages now enables one to commute into the CBD within 23 minutes.”
Some great examples of residential projects located nearby rail stations include:
Chiswick Gate in Burlington Lane, Chiswick. (Zone 3)
A project by Berkeley West London, Chiswick Gate is a gated and guarded development featuring beautifully landscaped gardens, concierge services, gym and high-end finishes. Buyers have the choice of Georgian-inspired townhouses and apartments, with prices starting from roughly £618,000.
Within walking distance of the Turnham Green underground station, Chiswick Gate is also 10 minutes away from Heathrow Airport and the Thames River, while the Chiswick High Street houses independent boutiques, antique shops, delicatessens, artisan coffee bars and renowned restaurants.
Jigsaw in Singapore Road, West Ealing. (Zone 3)
Located within walking distance to the West Ealing station (with connecting link bridge on site), this development by FABRICA and Rydon offers affordable entry prices and low service charges – prices start from approximately £420,000.
Lincoln Square in Portugal Street, London (Zone 1)
Brought by LODHA Group, Lincoln Square is located adjacent to the London School of Economics (LSE), The Royal Courts of Justice and just 5 minutes from Covent Garden. Residents will find prime retail options, office space and various entertainments right at their doorstep. Connectivity is a major selling point, with 3 tube stations within walking distance. Offerings include studio units, apartments and penthouses – prices begin from roughly £1,240,000.
Other exciting residential tidbits include Palace View in Lambeth Bridge, Zone 1 (From app. £1,290,000) and Lillie Square in Earl’s Court, Zone 2 (From app. £788,000).
Many Malaysians send their children to the UK to pursue their tertiary studies - Is it the opportune time for Malaysian parents to purchase properties in London/the UK?
Knight Frank foresee the UK’s world-class higher education to remain a strong driver for Malaysian buyers and investors. This demand is supported by the UK’s broad-based economy; think finance, technology, manufacturing, tourism, IT, construction, retail, etc.
There is never a bad time to buy properties for “own use”. Of course, the lion share of transactions occur in London, but secondary cities such as Birmingham and Manchester are now hot on the heels of London, receiving increasing levels of interest from discerning mamas and papas.
Besides transport connections, property pricing is equally important, and there are many hidden gems ripe for the picking. A prime example - the 1 bedroom apartments at The Bank, Broad Street in Birmingham, which is positioned next to Brindley Place, are selling from a mere £187,000. Birmingham is a vibrant city and has been ranked No.1 for Quality of Life outside of London and its hotspot status is confirmed by being the UK’s “Second City”
What are your tips for Malaysian investors?
Besides considering catalysts for growth such as infrastructure improvements and upcoming developments, investors should pay heed to:
- Sizing trends – Again, each buyer will have their own reason for purchasing. The majority of Knight Frank’s Malaysian clients feel most comfortable with 1 or 2 bedroom apartments as the purchase price remains reasonable, the rental level is affordable for incoming tenants, and the sizing allows for a wider tenant pool to be reached.
- Convenience factors – The level of amenities required by a purchaser can vary. Pure investors may prefer fewer amenities to keep the running costs low, while owner-occupiers may seek additional facilities for their enjoyment.
- Secure advice from professional property advisors who can offer a global reach with local expertise – ones that can take you through the whole process from start to finish.
- Think about after sales services such as lettings and management, finance, furnishings, taxation and operating costs including service charges.
- Visit a UK property exhibition in Kuala Lumpur – What Knight Frank does is to bring in the UK developers who are keen to provide Malaysian investors with a ‘display gallery’ experience over the course of an exhibition weekend, before supplementing this with private one-on-one meetings during and after an exhibition. These exhibitions are also attended by lawyers, developers, UK staff and qualified experts – all on hand specifically to help even the most inexperienced of investors settle any questions, concerns or requests in their property requirement.
Malaysian investors looking to break into the UK market are in luck! Knight Frank is hosting its UK Property Roadshow this very weekend:
Date: 14 - 15 October 2017
Time: 11 am – 6 pm
Venue: The Westin Hotel, Kuala Lumpur (The Straits Boardroom, Level 2)
DISCLAIMER: The opinion stated in the article is solely of Dominic Heaton-Watson and is not in any form an endorsement or recommendation by iProperty.com. Readers are encouraged to seek independent advice prior to making any investments.
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