Good time to buy London properties

Source : Sunday Times – 24 Jan 2010

For Singaporeans looking to invest in property, the home market is just one option.

Ms Jacqueline Wong, head of residential at Jones Lang LaSalle (JLL), says that as prime residential properties in Singapore become more expensive, investing overseas becomes an affordable option.

This year, investors may want to venture further – particularly to Britain and Australia, cited as main picks for the year by industry experts. In Britain, London appears strongly on the radar.

Industry players share the view that a depreciated currency and a devalued market make London properties a worthy investment.

The managing director of DST International Property Services, Mrs Doris Tan, believes ‘it’s a good time for investment both for capital appreciation and currency appreciation’. Aside from potential capital gains, investors can also look forward to reaping good yields.

Mrs Tan adds that returns for commercial properties in London are still decent, amounting to a net of 6 per cent to 8 per cent per annum. The good yields are not limited to commercial properties; residential ones offer the same advantage.

The regional director of international properties at Colliers Darien Bradshaw believes that yields of close to 5 per cent to 6 per cent can be achieved in upcoming areas like Canary Wharf in East London, commonly referred to as London’s main office and financial district, where demand was hit hard due to the credit crunch last year.

Still, two of Colliers International’s best-selling projects last year were Maple Quay and Dalston Square, both in the vicinity of Canary Wharf.

Mr Tim Murphy, managing director of IP Global, however, believes yields may be lower at Canary Wharf because of the large supply of developments there. He is more positive about areas in Central Eastern London, where good deals in the &pound300,000 (S$680,000) range can be found, and North London, in particular, Islington and Hoxton.

These locations represent new avenues for Singaporeans to invest in, besides the key prime locations. The ease of buying and transparency are further plus points for buying properties in Britain, say industry experts.

Mr Bradshaw notes: ‘Record-low interest rates, low stamp study rates, no capital gains tax, a good rental and resale market and no restrictions on foreign ownership are some of the main pull factors for London.’

Mr Murphy warns, however, that buyers should be buying completed and not planned properties to eliminate currency risks if and when rates change adversely.

Singaporeans who plan to send their children for education in Britain have a reason to invest in a property in London.

St James Urban Living is the developer of Silkworks, a 330-apartment complex in Lewisham, on the outskirts of south-east London, with prices starting from &pound199,000.

It held two exhibitions in Singapore last year and received 40 reservations from Singaporean parents, according to Mr Tim Reid, account director at TTA Public Relations in Britain for whom the developer is a client.

Parents who plan to send their children to Australia likewise are keen to buy properties Down Under.

Stronger interest from Singapore in residential and commercial properties has been noticed, says the head of Asia-Pacific research at DTZ, Mr David-Green Morgan. From the end of 2008 to last year, The National Australia Bank (NAB) saw a 20 per cent increase in its Australian loan book, says NAB’s country head in Singapore, Ms Vivien Koh.

The appreciation in the Australian dollar against most currencies – it is now A$1.25 against the Singapore dollar – is not putting investors off, according to Mr Morgan.

He says: ‘Investors overseas may see it as a strength in the economy and consider this a good time to get in.’

Melbourne, especially, has been a very popular choice, says Mr Sean Parker, project consultant at JL Property Group.

‘It (Melbourne) is still perceived as being affordable and almost all properties are freehold. Rental yields are at an all-time high as stock is low,’ he says.

He adds that returns on residential properties are around 5 per cent to 6 per cent while those on commercial properties are around 7 per cent to 9 per cent.

Despite an advantageous tax structure – investors get the same tax benefits as locals – Australia may not be free of regulatory hurdles. There are some restrictions on foreign ownership and purchasers who are foreign residents can buy only primary or first-hand property, Mr Bradshaw points out.

Looking ahead, positive sentiments in the Australian economy are likely to bring about more rewards for investors.

‘As sentiments continue to improve for Melbourne, Sydney, Perth and Brisbane, coupled with a major investment of US$50 billion (S$70 billion) in natural resources from China in August last year, there is sufficient stimulation that could lead to more positive gains in 2010 to 2012,’ he says.

Other markets such as Thailand, China and India are also attracting interest from Singapore investors, albeit at a slower pace.

Existing policies, tax regulations and prohibitions of ownership in these countries can sometimes deter purchasing. In India, for example, a lack of familiarity, bureaucracy and greater barriers to entry make acquiring property difficult, says Mr Morgan.

This year will see a wide array of overseas property launches. From London, DST has introduced Baltimore Wharf in Canary Wharf. London properties will also dominate Colliers’ overseas projects, including Lanterns Court, also in Canary Wharf.

In the first quarter of this year, Savills will showcase two projects in Sydney, one in Auckland, a group of good class bungalows in Kuala Lumpur and two developments in London.

JLL will be showcasing two projects – Firstlight Noosa in Queensland, Australia, and the yooPhuket, in Phuket, Thailand.

This weekend, Eastern and Oriental Berhad, a Malaysian property developer, is introducing the Quayside – water-themed luxury condominiums in Penang – to Singaporeans for the first time. The event, which started yesterday, is held at the St Regis hotel where the Quayside’s largest one-bedroom suites starting from 1,137 sq ft are featured.

Consumers are spoilt for choice – all the more reason to be wise and well-informed before making decisions. Ms Wong says: ‘Investors should study details like types of ownership, types of land titles (freehold or leasehold), taxation and acquisition fees, ownership and selling restrictions, before making an investment decision.’