Interest from overseas home buyers can help developers with liquidity, but firms must pay attention to what types of homes are being sought.
There’s a difference between an international UK property investor and an overseas UK home buyer, and developers must acknowledge which one is the dominant force if they are to benefit.
In the aftermath of the Global Financial Crisis, a flurry of international investors, particularly from Asia, began snapping up UK property, notably high-end flats in London and some other leading cities. And because these owners viewed the properties as investments, they largely sat empty, leading to criticism by some that cities were being increasingly blighted by growing numbers of ghost properties.
The popularity of such homes, which were often unaffordable to domestic or local house buyers, meant that many new developments became more skewed towards these types of property. While not great for UK buyers, what must be appreciated is that provisioning housing stock for these international investors, essentially provided developers with much-needed liquidity at a vital time.
And now, as we face the next crunch on house buying it’s useful to examine how the international market is shifting.
The move from investment to home
Whilst global lockdowns are mostly easing and travel quarantine periods being eradicated in the wake of COVID-19, the UK property market is once again regaining its international appeal. Despite Brexit, the cost of living and recent uncertainty within the UK government, international buyers still find the UK appealing and have the confidence and interest to invest here. However, unlike in 2008/9, today’s international buyers are predominantly looking for homes, not investments.
Asian buyers, have different expectations than the traditional UK buyer, their preferences tend to be modern, new build properties, priced between £250,000 to £600,000 with concierge and property management services. Finding a property where any issues can be fixed quickly with just a phone call, can be a highly attractive attribute indeed.
Not forgetting feng shui friendly too, therefore I urge developers to pay attention to the little things, like where the columns are structured in a property because it will go a long way for Asian buyers, they do not like them to be visible in the middle of the room!
Searching for the perfect size can be a priority too, small to medium size developments with no more than 100 units tends to be a preference for Asian buyers, along with properties with larger living rooms and kitchens with great ventilation, ideally with an optional closure due to the culinary culture. This is because they really value having spacious common areas to cook and spend more time with their loved ones, versus westerners who typically prefer larger bedrooms for privacy.
Overseas buyer incentives
The influx of overseas buyers is being driven in large part by the government’s British National (Overseas) (BN(O)) visa scheme. The scheme initially allowed people who took BN(O) status when Hong Kong became part of China in 1997 to come to the UK and has recently been extended to include some adult children of such individuals. While overseas buyers – including the more than 113,000 successful BN(O) visa applicants - might be greasing the liquidity wheel again due to high property prices and rising mortgage rates cooling domestic demand, developers must pay attention to what the international buyer is seeking.
This means that rather than focusing more on exclusive tower blocks, developers will need to lean towards more conventional housing projects, low-rise schemes with higher bedrooms. Gone are the demands for amenities on site, as long as homes are in a good central location and swift connections to local shops, restaurants, supermarkets and transport hubs, as well as good schools, no more than ten minutes away, minimising the cost-of-service charges, then the international buyer is interested - very similar to the demands of local property purchasers.
We all like a bargain though and so does the international purchaser: opportunities to buy at a discount, or with a good supporting package such as stamp duty contributions, a waiver of service charges, payment towards energy bills for a period (particularly pertinent right now) or even a starter furniture package. Taking the time to find out what they want from the get-go is what sets apart an investment from a long-term home. We should be putting ourselves in the shoes of these buyers, what incentives would motivate you? Let’s give them options and take the stress out of moving overseas, we want to make the process as easy as we possibly can.
Pivoting developments to meet the similar demands of the domestic and international buyer means that developers can get started sooner rather than later. By tailoring new developments towards both markets there’s the opportunity to produce a more viable product in the long term, which could be converted to domestic demand and even affordable housing provision as well.
Wing Chan Dean leads our International Properties team based between Hong Kong and London connecting UK developers and overseas purchasers.
To contact Wing, email Wing.Chan@colliers.com