Demand for London real estate, especially its brand-new properties, is attracting buyers from Malaysia to Hong Kong, writes Zuleika S. Sedgley
“NO one is taking time off during the Olympics,” says Charles Leigh, head of London Residential Development at CBRE, a real estate company that specialises in new build properties for primarily international buyers. “If a visitor calls up and wants to see properties, we want to be able to do it efficiently”.
The Asian invasion of London’s property market has been a well-documented phenomena. Last year it was reported that Asian buyers bought 60 per cent of new build properties in Central London.
Hong Kong topped the list of Asian buyers, snapping up 24 per cent of the properties, in the research that was carried out by the estate agents Knight Frank.
Over the past 10 years British estate agents have started to actively target Asian markets, concentrating on a trifecta of potential buyers — Hong Kong, Singapore and Kuala Lumpur. While all three have proved fruitful ventures for estate agents and developers, Malaysia's buyers have fallen behind their counterparts.
“Compared to Hong Kong and Singapore, Kuala Lumpur is a more challenging centre for sales, but it does continue to be a very important point on the radar of London developers,” says Tom Rundall from the International Project Marketing team of Knight Frank.
“Malaysia is a buoyant but challenging market. If we hold a property exhibition in Hong Kong or Singapore, if someone attends, nine times out of 10 they do with the intention of buying. In Kuala Lumpur, more people come just to have a look and do not have an immediate impulse to buy,” Rundall says.
One of the reasons for this may be Malaysians are interested in buying properties closer to home, in Australia and India.
Despite the slight reticence on the part of Malaysian buyers, locals still have the advantage over London buyers when it comes to new build properties.
“Malaysian buyers are more used to buying off-plan,” says Leigh. “Buyers from the UK want to see the finished product and walk around. Malaysians have a better imagination for what a building is going to look like.”
This culturally different attitude to risk has propelled Southeast Asian buyers to the top of the London property market.
As Asian buyers become more predominant on the property scene, London real estate agents are beginning to cater more to their top buyers in a myriad of ways.
"We now have agents in our London offices who speak Malay, Mandarin, Russian and Punjabi," says Leigh.
Real estate companies have also learnt to present Malaysian investors, who are a picky bunch, with suitable investment opportunities.
“Malaysian and Thai buyers go for larger apartments than Singaporeans or Hong Kongers,” says Leigh.
“For Malaysian buyers, the most important thing is that the properties are central. Good transport links, proximity to universities and river views are also important. Malaysians are also interested in areas with elements of regeneration.
Where a buyer from Russia is more likely to look at Knightsbridge, Southeast Asians will look for hotspot areas like Fitzrovia, Vauxhall Nine Elms and residential pockets around the city.”
An example of a property that would fit Malaysian demands is Fitzroy Place, a new-build property in the heart of Fitzrovia with interiors by the acclaimed firm, Johnson Naylor. It has been reported that half of the apartments have already been sold.
“Southeast Asian buyers were enthusiastic because of detailed layouts by developers, good pricing and a central location,” says Leigh.
The Asian fever has even spread to developers who are incorporating Eastern sensibilities into the design of their buildings.
“We work with the architects and developers to make sure that apartments are laid out to appeal to the target audiences. Some buildings in London will now not include the number four, and trophy apartments are being put on the eighth floor.”
This combination of real estate agents paying more attention to the needs of Asian clients, developers bowing to Eastern traditions and the favourable exchange rate have created a perfect storm for continued Asian dominance of London real estate markets.
A safe bet
THE favourable exchange rates that the European financial crash created is a big draw for investors. The pound‘s exchange rate has remained below the RM5 mark since late 2011.
Malaysian buyers are attracted to British property because of the schooling system in the UK. The London lifestyle makes this decision even easier. “London is geared towards high net worth individuals and is not just a business centre. It‘s a lifestyle city filled with good restaurants, arts and shopping,“ says Charles Leigh.
London real estate is an asset class and has historically always performed well. It‘s also an investment that you can use and enjoy.
London developers‘ specifications have become more reliable. In the past, developers plans had to be taken with a pinch of salt. “It was expected that the finished results would not be as good,“ says Leigh. “Now almost all developers accept that it makes financial sense that the specification is good and it‘s not worth cutting corners.“
In the past, there were fears that estate agents and developers would swindle overseas customers who were unaware of a city‘s geography. However, the number of such cases have decreased in recent years because of the increasing knowledge Malaysian investors have of London property markets. Rip-offs are unlikely to happen because “Southeast Asians are extremely sophisticated buyers“, says Tom Rundall from the International Project Marketing team of Knight Frank.
Interests in London properties do not sway with the market. London real estate is the site of both offensive and defensive investment. When markets are strong, people want to invest in real estate and see London as a safe bet, and the same logic applies when markets are weak.
“When the global financial markets are in turmoil, what are we going to do? Lets keep it somewhere safe and put it in London real estate,“ says Leigh.
Malaysian investment in London‘s real estate encompasses the residential and commercial markets. In June, Malaysia‘s prowess in property investment increased dramatically when local investors won the rights to one of London‘s most iconic landmarks.
On June 7 it was announced that SP Setia and Sime Darby‘s property arm won a bid to redevelop the Battersea Power Station, a protected 15-hectare site on the Southside of the River Thames.
The station‘s austere outline adds a dramatic twist to London‘s skyline and was immortalised in 1977 when Pink Floyd put it on the cover of their album, Animals.
The right to redevelop the site, which had been abandoned for the past 30 years, sparked a bidding war between 15 potential buyers, including the Chelsea Football Club.
The Malaysian duo have now entered into an exclusivity agreement with Ernst Young, the administrators and receivers of the property, to purchase the site for £400 million (RM1.9 million).
The Battersea Power Station is the latest addition to the property portfolio of Malaysian companies in the London market. Local institutions, like the Employees Provident Fund, have also been prolific buyers, acquiring seven UK properties for a total of £G600 million.