Rich – and naïve – foreigners are being lured to buy new homes in London in a ‘feeding frenzy’, it has been claimed.
Over 60% of London new-builds are being bought by foreigners, with the proportion rising to 88% where the price tag is over £5m.
The properties are bought sight unseen and off-plan, and usually for investment purposes.
Naomi Heaton, who runs the London Central Portfolio Fund, an investment business, said there was a “massive marketing hype” of new homes to the overseas market.
She warned that investors are being poorly advised, while a London MP said that selling developers’ new homes to Asian investors was an ‘insult’ to local people.
Heaton said: “These properties are marketed en-masse at glamorous property exhibitions as speculative investments, particularly targeting unsophisticated buyers in Asia. They are bought off-plan in what can only be described as a feeding frenzy.
“This method of selling negates the hassles of searching and travel, and new-builds also offer modernity which local Asian markets associate with high-end.
“However, chronic oversupply of these new-builds results in dramatically suppressed yields and suppressing prices. Canary Wharf has seen 30,000 new units developed since 2000, in stark contrast to the 500 or so units a year in central London. Prices are just one third of those in the heart of the capital and the units have limited resale potential once they are no longer new and the Asian buyer has moved on to the next marketing phenomenon.”
She warned: “Investors are paying a premium for newness, which by implication has built in obsolescence. At resale, units in big schemes can only compete on price.
“The rush of identical properties coming on to the market for rental also means that landlords are all vying for tenants at the same time, with a resultant downward pressure on rents.”
Meanwhile Lib Dem MP Simon Hughes said that selling properties in a regeneration scheme at Elephant & Castle to rich Asian buyers insulted the local people.
Developers of the Heygate Estate have replaced what was council housing with flats, being marketed for sale in the Far East by Colliers International on behalf of developers Lend Lease.
The properties are being sold off-plan from £310,000 for a one-bedroom flat. They will not be completed until 2015.
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