News

London 2012

Now that the European Championships are over in Poland and Ukraine, the focus is on London for the Olympic Games. The games opened on 27th July 2012, with the opening ceremony welcoming all those who have bought the reported 3.5 million tickets for what's known as "the greatest show in the world".

The UK government has undoubtedly invested vast amounts of money in setting London up for the games, with the creation of the Olympic Village, investment in the surrounding East London region and mass marketing to attract visitors to the UK. The games will offer a unique opportunity for visitors to take a fresh look at the changing face of London and the UK generally. The Foreign & Commonwealth Office and their Public Diplomacy Partners have grasped the games as an opportunity to change the perceptions of Britain and to raise its mark as a global City.

In addition to the upcoming Olympics, those overseas are also drawn to London for another reason - its property. There appears sufficient evidence that Europeans in particular are visiting and investing in London. There is endless media coverage on the returns and performance of the London property market. Numerous indicators show that house prices have fallen overall, however average prices in the capital appear to have returned to, and in prime areas exceeded, 2007 peaks. With fears increasing over the collapse of some Eurozone economies, funds from Europe have been channelled into prime Central London property. The last few years have seen many upbeat foreign buyers outbid UK buyers for property, as they view property in London as a safe haven from the Euro uncertainty.

There appear to be many reasons why wealthy Italians and Russians, to name a few, are purchasing houses and flats in areas such as Chelsea, Knightsbridge and Mayfair. Foreign investors seek to protect their wealth from the economic uncertainty in their homeland economies and many are of the opinion that with the UK not being tied to the Euro, seemingly transparent tax laws and a stable political environment, London offers a relatively safe long to medium term location for investment. However, there is the debate from some economists who suggest that prices could plummet if the Eurozone collapses. The debate continues.

In light of the recent influx of foreign purchasers in the UK, some European economies have introduced measures to dissuade the purchase of second homes abroad. For example, in Italy the Government has introduced a 0.81% tax on overseas properties. However to counteract this, tax benefits are offered to Italians investing in buy-to-let properties, where they can be exempt from paying any capital gains tax if they've owned the property for more than 5 years. This offers a tax free return on their investment.

Aside from the economic benefits which could be reaped by investing in London property, investors are also attracted by the social, leisure and education opportunities London has to offer. We have carried out a number of valuations for private schools and tuition centres recently, which are often enrolled with students from overseas, many of whose parents are from mainland Europe and have purchased second homes in the capital. Although criticised by many from within the UK, across the globe a UK higher education is still held in high esteem.

All in all, being a Londoner is a nervous and yet exciting prospect. One hopes that the Olympics will be a tremendous event, putting London back on the map as a global City. Much will of course depend on the fortunes of the wider global economy. History points to mixed after effects of Olympic hosting cities and we can only hope that London doesn't let us down. In a similar trait, let us hope that the London property market doesn't unveil any serious surprises and maintains a sustainable level of growth amidst the Eurozone crisis.

Prepared by:
Shaf Ali BSc (Hons) MRICS
Partner | Belleveue Mortlakes Chartered Surveyors
sali@bmortlakes.com