Why Asian investors in London should focus on older residential stock


Time to brush up on your history, says Naomi Heaton

Naomi Heaton

Naomi Heaton has made a virtue of her dynamic approach throughout her career. After studying at Oxford University she held directorships at two major advertising agencies, including industry giants Saatchi and Saatchi, where she was the company’s youngest ever female director.

It comes as no surprise then that she relishes being able to expend every ounce of her considerable energy at the sharp end of the London property market in her current guise as founder and CEO of London Central Portfolio (LCP).

She’s had her work cut out for her recently. Her firm is a formidable force in London’s indomitable and highly lucrative real estate investment sector. And with potential buyers from all corners of the globe circling the market for value in the wake of the UK’s Brexit vote last year and the subsequent crash in sterling, Heaton has rarely been busier. “Real estate in central London makes for a highly resilient asset,” she explains, as she takes some time out of her hectic schedule to offer some expert insight to the venerable treasures up for grabs in the city’s golden core.

Why does LCP focus so narrowly on central London?

There’s very limited stock what we call ‘prime central London’. Central London is a conservation area with a unique architectural heritage, so you can’t pull down buildings and build higher ones. There’s almost no new build – only about 289 new units a year come into the market. The stock never really increases, although the entire world wants a piece! Therefore, there’s always going to be an imbalance of demand and supply.

Outwith central London there’s the potential to build mass stock, so you get oversupply, you get a commodity and you get price suppression. It’s the scarce resource that people really aspire to that keeps going up in value.

Because central London is so historic, do you often have to convince Asian investors of the benefits of central London’s historic properties?

Yes. It’s a completely different mindset. Many Asian buyers, particularly those from China, are absolutely committed to new property. I think there’s definitely a gap in cultural desires.

Due to central London’s historic architecture, age is a virtue. The older a property gets, the more valuable it gets. However, in the Middle East, Southeast Asia and China, new is associated with premium, luxury and quality, and old is associated with run down and not so good. It is a gap we try to bridge as much as possible.

More: Asian HNWI still love a slice of London luxury

The ideal is a beautiful historic façade, but brand new inside

How do you advise your clients on where to buy?

Different people have different requirements. Certain clients will have a location preference and some will have architectural preferences, so some will definitely want the white stucco period properties, which are synonymous with central London, others will want portered mansion blocks.

Most people want maximise their capital appreciation and their rental return. Places like Mayfair, Knightsbridge and Belgravia are very expensive – you just can’t get the returns because of the cost of the property. We tend to direct clients towards emerging areas within prime central London.

Bayswater, Notting Hill, Westbourne Grove, Pimlico, Westminster and Victoria all offer pretty good value, and people can add value through renovation, get value through continued market appreciation and get good rents because they’re buying in at a lower price point.

More: HNW Middle East students in London want to live here

Open plan is best, and hallways are a waste of space, says Heaton

How has Brexit changed things?

The only way Brexit has really changed things is that sterling has depreciated so much.

For our market, the biggest impact hasn’t been Brexit, it has been taxation. Stamp duty went up for most foreign investors on 1 April by 3 percent. At the end of 2014, graduated stamp duty was also introduced. The combination of both of these has impacted the top end of the market particularly, with stamp duty potentially increasing from 5 percent to 15 percent.

While the luxury end has been impacted by these massive taxes, at the lower end of our scale it is very much business as normal. We’re looking at individual units under GBP1million (USD1.2million), and for 1 bedroom flats probably under GBP700,000 (USD851,500). This is the kind of price you want to pay if you want to maximize your returns in both capital and rental scenarios.

Because of the referendum, but also because of the taxation, for the savvy investor it’s a good time to be buying. They’re going to get more for their buck. They’re buying what I would call ‘added value properties.’ They’re saying “right we’ll buy things that maybe we couldn’t afford before, which are really special.”

This story originally appeared in Property Report issue 139.

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