The first surge in London property prices dates back to the 1980s. The unofficial name of this period is "Arabic". Explanations are hardly needed - suffice it to recall, for example, the notorious purchase of Harrods by the Al-Fayed family. Many analysts linked the surge in demand from foreigners to the then Prime Minister Margaret Thatcher, whose activities in office significantly improved England's image. However, in the late 80s and early 90s, prices for English property were already rolling downwards - the reason lay in the global financial crisis. The period from the late 90s to roughly 2003 was characterized by another sharp jump in prices. Apparently, this period will go down in the history of the English real estate market under the name "Russian". Because, according to many London realtors, it was the interest of buyers from Russia in elite properties in central London that inflated yet another bubble in the real estate market.
Only for millionaires
Overall, over the past 30 years, the cost of apartments and houses in the most prestigious areas of London has increased almost sevenfold. As noted by the general director of Kirsanova Realty, Filipp Bogdanov, these areas in descending order of prestige include Belgravia, Mayfair, Knightsbridge, Chelsea and Kensington. One-bedroom apartments here now start at least from 900 thousand pounds. According to Nick Tomlinson, partner of the London company Knight Frank, the average asking price for a good two-bedroom apartment (by domestic standards, a three-room flat with an area of about 120 sq. m) in these areas currently fluctuates at about $2.5 million. The cost of small houses in the famous Victorian style is from $15 million; townhouses, depending on the area, are offered at prices from $5 million.
According to Mr. Bogdanov, property in northern London, primarily Hampstead and Regents Park, is less prestigious and, accordingly, cheaper. Prices here are approximately 20-25% lower than for similar properties in the central part of the city. There are also some highlights in the southern part of London. First and foremost, we include Richmond and Kew Gardens. However, it is much more difficult to talk about pricing in these areas, since when assessing housing in these places, which are prestigious for the British, the rich history of houses in this part of the city, which was previously considered the most aristocratic, and the view from the windows onto the nearby botanical garden acquire great importance.
The most ambiguous London district in investment terms is Docklands. Investors and developers currently engaged in its large-scale construction are trying with all their might to give it a prestigious status. This move is primarily aimed at numerous foreign buyers, since the British themselves refuse to recognize it as elite. However, in the event of a successful outcome of the advertising and marketing campaign, buildings in Docklands may grow in price quite well in two or three years: local realtors are discussing the possibility of a 25-30% increase in the value of ready-to-use properties over the next three years. Using, however, the vague "may be" at the same time.
Let us also note that the cost of elite housing is influenced, besides the prestige of the area itself, by a factor not entirely clear to us, such as proximity to the underground. One of our compatriots who owns property in London says that "the British of any level of wealth do not consider it 'uncool' to ride the underground, because it is convenient, simple and generally accepted. Moreover, one should not forget about the restrictions on private vehicles in the city center. The fact that an apartment is within a five-to-seven-minute walk from the underground can seriously increase its price." Another pricing factor of crucial importance for the British when buying a prestigious apartment is the availability of one's own key to the door leading to the park (or more precisely, a small garden) laid out next to the house. This park is usually located inside three houses arranged in the shape of a U. Since it is in common shared ownership of the apartment owners, only the owners themselves have the right to stroll there.
Speaking of residential real estate in London, its Russian-speaking owners complain about the extreme difficulty of carrying out both internal repair and redevelopment works, as well as attempts to introduce any changes to the facade of the building. Even the installation of a satellite television dish, so necessary for any of our compatriots, involves the need to obtain numerous permits. And it is far from certain that permission will ultimately be granted, since London authorities are extremely scrupulous about any attempts to alter the facades of buildings in the central part of the city.
According to Nick Tomlinson, it is safe to say that any residential property in prestigious areas of London is a highly liquid asset. The exposure time for properties put up for sale on average does not exceed two months, which is possibly one of the best global indicators when it comes to prices exceeding $1 million.
Assessing the investment attractiveness of investments in prestigious London real estate, English analysts agree that in the coming years it will not be subject to any serious fluctuations either downward or upward in its value. As experts at Kirsanova Realty note, the latest area around Hyde Park, Bayswater, looks potentially more interesting for investors. It is here that new construction is being carried out quite intensively and building reconstruction is widely used - old hotels are being converted into residential apartments. Investments in these properties can yield up to 20% per annum. With one significant “but”: if you can correctly assess and calculate the investment potential of the project. The British are still experiencing and discussing the commercial failure of the Millennium House project, both its entertainment and residential parts called Dome. For example, to increase its attractiveness and value, an investor even sponsored the construction of a new metro station, spending at least $10 million on it (the exact amount was never made public). However, apartments are not selling. And English realtors also give extremely pessimistic forecasts for prices of apartments in houses on the banks of the Thames due to the constantly deteriorating ecological condition of the river.
But not necessarily London
However, cosmopolitan Britain is ready to offer its new inhabitants real estate at completely different prices. According to Filipp Bogdanov, very good apartments and townhouses in the famous suburbs of London, located within an hour's drive from the city center (such as Oxford, Cambridge, Greenwich, Wimbledon), can actually be purchased at prices around 250,000-350,000 pounds. Moreover, these areas account for the main sales volumes: today they are optimal in terms of price-quality ratio both for foreigners permanently working in London and for those studying at famous English universities. Prices for houses with a small plot of land of about three to four hundred square meters range in these areas from 0.5 million to 1.2 million pounds. Such a purchase is a fairly high-quality risk-free investment in real estate with a potential annual growth of 6-8% per annum over the next three to five years.
A Little About the Boring but Important
We are talking about the legal aspects of purchasing real estate in England. Local legislation does not restrict the ability of foreigners to acquire any real estate: non-residents have the same rights when purchasing housing as the British themselves. Moreover, foreign buyers of English real estate are exempt from inheritance tax and capital gains tax, which for local residents is 40%. In addition, for non-residents purchasing real estate in England, the size of a mortgage loan can be up to 85% of the total value of the property.
However, when purchasing residential real estate in the UK, a representative of a foreign state pays VAT, which is 7.8% of the transaction value (remember that there is no point in even talking to the British about understating the transaction value and giving back a certain part of the sum 'in cash' for this). The second payment when making a transaction is a one-time state duty for registering real estate in the Chamber of Residential Property, which is about $1,000 regardless of the transaction value. Realtor services in England cost approximately 4% of the property price. Plus lawyer services for drawing up the deed and checking the purity of the transaction, payment for which ranges from 3 to 5% of the property value. All necessary documents for the transaction are prepared and registered within a maximum of one month. The annual real estate tax in England is 1.5% of the housing value.
You will have to visit and live in your owned property on a regular visitor visa. Unlike the situation in a number of other states, owning real estate does not give foreigners the right to obtain English citizenship or a permanent residence permit - for this it is necessary to conduct a real business in the UK. This may become quite relevant in the near future for our compatriots who have already purchased real estate in England but still believe that it is more profitable for them to do business at home.