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Research reveals importance of foreign property investors in London
Brief:A new report has revealed that overseas buyers accounted for 15% of new homes purchases in London in 2013.
 A new report has revealed that overseas buyers accounted for 15% of new homes purchases in London in 2013.
 
Whilst some may be surprised by this figure because headlines often talk of much higher percentages being sold overseas, the research makes the observation that very few, if any, major developments are marketed exclusively overseas.
 
Additionally, overseas sales drives tend to focus on the earlier launches, often to secure the release of project finance. The best funded developers can be selective with overseas marketing and sell some schemes exclusively in the UK, but this is often not an option for smaller builders.
The proportion of overseas buyers in any particular development is highly location dependent - it can be higher than 80% in Prime Central London but lower than 10% for much of outer London.
 
At the same time the report concludes that there is no evidence that new homes are being left empty.
 
Commissioned by the British Property Federation, the ‘Who Buys New Homes in London and Why?’ report, carried out by Molior London, will be launched tomorrow at the British Property Federation’s annual Residential Conference.
 
The findings of the research explains how economic and financial climates have influenced the market and its transitory nature and illustrates how the exceptional economic circumstances of the last few years have had a direct impact on investment in the London property market.
 
The report reveals that 39% of new build homes in 2013 were bought by owner occupiers and 61% by investors. The majority of these investors buy the new homes to let, accounting for 48% of all purchases. In addition to this, most of the properties that were bought to sell ended up as rental stock, and build-to-rent stock is by definition bought for renting out.
 
Separately, the study looked at rental demand in recently completed developments. Across 107 developments in London, there were no cases where tenant demand was considered low. In light of the strength of demand in London’s rental market, the BPF has welcomed findings that the majority of the flats bought as an investment are returned to the market, therefore satisfying the demand for rental homes.
 
The fledgling build to rent sector is also starting to make a contribution to the capital’s housing need, with 8% of homes delivered for PRS. The BPF welcomes this as an encouraging start to the large scale private rented sector model that it has long supported, as it suggests that the capital is moving towards providing a strong, customer-focused, easier-to-manage PRS which will cater for London’s growing rental market.
The report expects that the market is likely to shift, in the short term at least, towards a 50:50 owner occupier and investor relationship during 2014, illustrating how sensitive the market is to economic circumstances. As the domestic market begins to recover from the worst recession since the Great Depression, a shift towards owner occupation is likely to take place as the economy picks up and a stronger pound makes international investment less attractive.
 
Liz Peace, Chief Executive of the British Property Federation, commented:
“We shouldn’t forget that we are just emerging from the worst recession since the Great Depression. The last few years have been difficult for housing providers, with house building, lending to the sector and mortgage availability all dropping off a cliff. Accordingly the industry, like any manufacturing industry, has had to diversify into new markets. Investors looking to pre-fund new developments have helped get projects off the ground and kept people in jobs.
 
“Raising capital to fund any type of development has been very difficult over the past few years, so that those who helped keep development going, including investors, during that time should be congratulated not pilloried. Accordingly, as the economy starts to stabilise, owner occupation levels are likely to rise.

financial reporter
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