London private home market: An informative video

By The Folks @PropTalk - October 19, 2014 No Comments

While surfing the net this morning, the wife and I found this rather informative video on the current state of the London private home market and the uphill battles that local home buyers are facing given the onslaught of foreign buyers.

Several messages in the video were rather stark:

1. London private home market has become a playground for the rich and especially rich foreigners. 

2. Chinese buyers are supposedly buying London properties as a "toy" because of their affordability. "We have so many Chinese investors, each looking for several properties, maybe 3 -10 (properties)", said one property agent in the video.

3. Many Chinese buyers will leave their London homes empty for most of the year except for their once-every-quarter shopping trips, where their apartments are used as holding areas for their shopping bags.

4. Foreigner buyers generally view London property as a commodity. They enter the market with a very short term view (quick capital gains) and many may not see, much less live in the London property that they have bought into. And many owners will prefer to leave the apartments empty (as it is more cumbersome to resell with tenancy). This may eventually result in London becoming more and more of a "Ghost Town".

5. The London private home prices have been rising over the past few years and it is expected to increase another 11% this year. This has resulted in many locals being priced out of the London market and pushed further and further away from the city.

6. A strong local demand for private homes do exist, as the number of Londoners looking to buy still outweighs the number of apartment units that are currently available in the market. However, there is a big disparity between what most locals can afford versus the current asking prices. To make things worse, they now have to compete with hordes of foreign buyers that continue to push prices up. As one Hong Konger buyer said in the video, " We are coming in with the cash!"

7. The general fear is that if some adverse market event will to cause every foreign owners to start pulling their monies out of the London private home market at the same time, it will cause a rapid downward spiral in the property market.

8. So is the current state of the London private home market already the hallmark of a price bubble? You will get a perspective to the question towards the end of the video.

When the wife and I made our first purchase in London some three years ago (which we subsequently sold), we were already exasperated by the fact that we were paying almost S$1,800psf for a foreign property when we were unwilling to go beyond S$1,000psf in Singapore. But reality bites when we we recently discovered that units in the same development are currently reselling at more than S$2,500psf! 

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