Overseas buyer interest in London’s housing market is expected to increase in the coming year, despite the mortgage crisis, leading to a potential boost in prices

The estimated value of homes owned by foreign buyers in the capital currently stands at £55.2 billion. According to estate agent Benham & Reeves, there are 103,425 properties in London registered with an overseas correspondence address or to an overseas company. Foreign buyers account for approximately 2.76% of the city’s total existing housing stock, which is valued at just over £2 trillion.

In certain boroughs, such as the City of Westminster and Kensington and Chelsea, the proportion of homes owned by foreigners is even higher, at nearly 13% and over 10% respectively. Benham & Reeves conducted research using data from the Land Registry and the government to determine the value of overseas-owned properties. They found that the borough of Westminster has the highest value of foreign-owned property, totaling nearly £14.9 billion, which represents approximately 12.8% of all dwellings in the borough.

The study also estimated that foreign homeowners across England and Wales own property worth £84.2 billion. The total value of housing stock in these countries amounts to £7.9 trillion. Marc von Grundherr, director of the estate agency chain, noted that foreign home ownership levels have increased by 3.2% in the past year, primarily driven by individual buyers rather than offshore entities. Von Grundherr’s firm expects a further 4% to 5% increase nationally in the coming year, with London making a significant contribution to this growth.

Von Grundherr pointed out that many international buyers are less affected by the impact of interest rate increases because they often purchase properties with cash. Additionally, borrowing costs in the UK are seen as favorable compared to buyers’ domestic markets, leading to continued interest from overseas investors. While there may be some concerns about the growing presence of foreign buyers in the London market, Von Grundherr stated that they are providing a much-needed boost to market sentiment without causing prices to skyrocket. He also mentioned that some foreign buyers could contribute to the rental market, especially as many buy-to-let landlords consider selling due to rising borrowing costs.

Amy Meyrick, head of international sales and marketing in real estate consultancy CBRE’s residential team, noted that international buyers play a crucial role in the new build sector. Their willingness to commit to off-plan purchases before construction begins is advantageous for developers. Buyers who are equity-driven and purchase with cash are less impacted by the current mortgage rate environment.

Overall, despite the mortgage crisis, overseas-owned homes in London are expected to increase in value over the next year, contributing to the city’s housing market and providing support for property prices.

Stamp Duty Land Tax (SDLT) is seen by Craig Mackinlay, MP for South Thanet, as a hindrance to personal and labor mobility. The tax has reached record levels, with receipts for 2022/23 at £19.3 billion.

Over time, the tax thresholds have fluctuated, including temporary reductions during the Covid-19 pandemic and the introduction of additional property surcharges to discourage buy-to-let investments.

Currently, the highest SDLT rate for a typical homebuyer is 12% on amounts over £1,500,000. The Treasury seems content with these rates due to restrictions on housing supply and asset price inflation driven by long-term low interest rates. However, Mackinlay questions the fairness of the tax system, particularly in regions with higher property prices such as the South-East, where moving into a similarly sized property incurs significantly higher tax costs. This disparity penalizes individuals based on their birthplace or work location and can deter people from making necessary relocations.

The burden of SDLT becomes apparent when considering the costs associated with moving to a new job. Uncertainties regarding the job’s longevity, suitability of schools for the family, and the substantial SDLT payment can lead to hesitation and reluctance to make the move. For higher rate taxpayers, the SDLT payment of £25,000 for a £750,000 property in Kent translates to nearly £42,000 of gross earnings. If added to a mortgage, the total amount paid over a 25-year term would be around £60,000, all from taxed earnings.

Mackinlay also highlights the impact on older individuals who are left in larger properties after their families have moved out. These properties often have more bedrooms than necessary, are located outside town centers, and are costly to maintain. Coupled with high Council Tax assessments, the prospect of incurring SDLT when downsizing discourages many from taking the necessary step. Mackinlay suggests that if there is relief for first-time buyers, there should also be relief for last-move buyers. Additionally, the families moving into these properties would contribute to SDLT under the current regime and generate taxable revenues and VAT through refurbishments and home improvements.

The MP points out the unintended consequences of tax policies and their negative impact on desired outcomes. He questions whether SDLT should apply to residential property at all and highlights the challenges posed by current Capital Gains Tax rules, which discourage the sale of second homes. A potential 28% Capital Gains Tax and a further 40% Inheritance Tax on the remaining proceeds discourage the liberation of many potential homes. Mackinlay suggests that a more favorable Capital Gains Tax structure would not incur a cost to the Treasury, as stagnant properties generate no tax revenue.

In conclusion, Mackinlay emphasizes the need to address the shortage of houses through positive tax incentives rather than relying on temporary solutions that do not effectively address the housing crisis.

Mandarin Oriental’s upcoming luxury hotel in London’s South Bank, Mandarin Oriental Bankside, will not only offer a world-class hotel experience but also feature 70 branded residences.

Set to open in 2028 as part of the Bankside Yards development, these residences will provide an exclusive living experience in the heart of one of London’s most vibrant areas.

The branded residences at Mandarin Oriental Bankside will grant residents access to the renowned services and amenities of Mandarin Oriental Hotel Group. Combining the comforts of home with the luxury and sophistication synonymous with the brand, the residences will offer a truly elevated living experience.

Designed to cater to the discerning needs of residents, the branded residences will feature a range of amenities. A dedicated sky lobby lounge will serve as a private retreat where residents can relax and socialize. A private roof garden will provide a tranquil outdoor space with stunning views of the city. The residences will also include convenient parking facilities, ensuring residents have easy access to their vehicles.

By choosing to live in these branded residences, residents will have the unique opportunity to immerse themselves in the vibrant Bankside Yards development. They will be able to enjoy the proximity to world-class cultural institutions, top-tier businesses, and a diverse community. The residences will be an integral part of the larger mixed-use development, which aims to create a dynamic and sustainable urban environment.

With Mandarin Oriental’s reputation for providing exceptional service and unparalleled luxury, the branded residences at Mandarin Oriental Bankside are set to become a coveted address in London. Offering a combination of elegance, convenience, and world-class amenities, these residences will provide an exceptional living experience in one of the most exciting neighborhoods in the city.

HSBC’s recent announcement of leaving its headquarters in Canary Wharf has raised concerns about the district’s future. However, the owners of Canary Wharf, the Canary Wharf Group, are implementing a new strategy to reinvigorate the area.

They aim to transform it into a vibrant live-work-play destination, appealing to a broader range of industries beyond banking.

Efforts to diversify the district are starting to show promising results. The presence of residents has increased, with people enjoying the district’s amenities such as waterside walks, outdoor cinemas, and swimming in the waterways. Life-science start-ups and healthcare companies have also moved in, and weekend foot traffic at the Canary Wharf rail station has nearly doubled compared to pre-pandemic levels.

The Canary Wharf Group plans to enhance the district by adding residences, developing life-sciences labs, and hosting cultural activities. They are capitalizing on the undersupply of housing in London by constructing a 23-acre housing district near the skyscrapers. This mixed-use approach, along with attracting life-sciences and healthcare businesses, is seen as a strategy to counterbalance the impact of remote work on office occupancy.

While some firms, including HSBC and Clifford Chance, have chosen to relocate from Canary Wharf, analysts believe that other companies in different sectors will eventually replace them. The iconic HSBC tower and the prestige associated with the district are expected to continue attracting businesses.

The Canary Wharf Group faces challenges due to the distressed market and debt refinancing, but it maintains a strong financial position with substantial assets. Its long-term vision to create a thriving live-work-play environment, coupled with improved transportation connections through the Elizabeth line, has helped bolster foot traffic in the area.

While there is still room for improvement and some Londoners remain hesitant to spend more time in Canary Wharf, the district’s transformation is gradually taking shape. With the implementation of its new strategy, Canary Wharf aims to establish itself as a leading center for life sciences and a desirable destination for both residents and businesses.

According to Savills, the prime property market in London has shown remarkable resilience in the second quarter of the year. While prime London property prices have slipped by 1% over the past year, the market has remained relatively stable due to the presence of cash buyers and a price-sensitive environment.

In contrast, regional prime properties in the UK experienced a 3.5% annual price fall, reflecting a refocus of demand back to the capital.

Savills highlights that high-value properties in central London, where buyers rely less on debt to make purchases, have experienced the least downward pressure on prices over the past year. However, areas with a higher proportion of younger homebuyers and investors, such as Clerkenwell, Shoreditch, and Victoria Park, have been more price sensitive compared to more established markets like Mayfair, Westminster, and Marylebone.

A closer look at the prime central London market reveals that houses saw a 0.2% decrease over the quarter and a 0.7% decline over the past year. Apartments remained flat in the second quarter but experienced a 1.1% drop over the past 12 months. At the top end of the London market, international buyers have been relatively slow to return, influenced by factors such as the appreciation of sterling against the dollar, macroeconomic pressures, and increased transparency around overseas ownership.

LendInvest, a non-bank mortgage lender, has launched a new buy-to-let range aimed at supporting landlords. The range offers rates starting from 5.54% and includes significant rate reductions across buy-to-let products.

LendInvest has reduced its trackers by 0.40% and introduced new fixed-rate products. The company aims to meet the ambitions of brokers and customers by providing competitive rates that align with market demand. The new offering is powered by an improved technology platform, which enables faster processing of mortgages for brokers and clients. The rates, available up to 75% loan-to-value (LTV), are made possible through LendInvest’s recent £500 million partnership with Chetwood Financial Limited. More information about LendInvest’s updated product range can be found on their website.

In terms of the rental market, prime London rentals performed well, with a 1.4% increase in the second quarter. Annual rental growth, which peaked at nearly 14% in September, now stands at an average of 6.7%. Smaller rental properties are in higher demand as more people choose to rent in response to higher mortgage costs.

Savills predicts that the recent increases in the Bank of England base rate and mortgage costs will continue to put pressure on prices, particularly in mortgage-dependent segments of the prime market. Despite this, macroeconomic uncertainty is expected to delay a recovery in prices until there is a meaningful decline in inflation and the prospect of gradually decreasing interest rates.