Foreign buyers are rushing to rescue London’s prime property market in record numbers, according to the latest figures from luxury property developers, Finchatton. Matthew Hardeman reports
Luxury property developers Finchatton have reported a 38 per cent increase in enquiries since the vote to leave the EU, the firm’s co-founder has told Spear’s.
The firm also reports that the enquiries they are receiving are also now more diverse in origin: a 17 per cent increase in the number of different nationalities over the past six months, to be exact (it also states that it has sold to more buyers from the Americas in the previous twelve months than in the past four years combined). While limited to a single super-prime developer, the numbers offer privileged insight into the latest movements of international UHNWs post-Brexit.
The figures may also help to allay fears of a sinking market: prices across prime central London have fallen in the past few years across the capital’s gilded postcodes, with Belgravia, Mayfair and Knightsbridge experiencing some of the sharpest declines. Growth began to slow in mid-2014, after a period of growth driven by sharp rises in demand for property in safe-haven markets like London following the 2008 global financial crisis.
From the start of 2017 up to April, sales prices dropped by an average of 6.9 per cent across prime central London, according to the latest figures from Savills, while Belgravia saw an 8 per cent drop.
Alex Michelin, Finchatton’s co-founder, recounts the recent musings of one UHNW (‘a wealthy buyer – a billionaire’) who sees the surge of interest as much more than mere coincidence.
‘Once Britain leaves the EU, London becomes the Singapore of Europe’, Michelin says, quoting the plutocrat. That is to say, as Michelin explains, ‘a very, very well-run economy which is safe, [it has] rule of law, you can put your money to work, safely knowing that it is really your money, and yet you will have access, they think, to the south of France and all the other things that people love about Europe on your doorstep.’
The idea is that London will now be ‘sort of that perfect place, a bit like Singapore’, he adds: ‘A place you can live, invest, own property, travel to, but from there you can jump off and go to China, Japan and the rest of Asia’ (or in the case of London, the commercial hubs and holiday destinations of Europe).
Could London even become so attractive that it lures Asian HNWs away from Singapore? Michelin notes that while wealthy Chinese buyers have been plying the UK market for some time, most have been investors buying one or two bedroom flats in riverside developments at around the one to two million pound mark, or even less.
‘What we’re seeing now is the real heavyweight Chinese buyers coming onto the market, with 20, 30, 40 million to spend – that we’re seeing a lot more of’, (he also notes a ‘huge number’ of new big-ticket Indian and Middle Eastern buyers making an appearance, too).
These wealthy foreigners are being lured in by much more than a cheap pound: ‘A more efficient, more competitive economy, probably with lower taxes – that’s what these billionaires are seeing: that actually this [Brexit] makes the UK more of an attractive place to do business.’
Michelin is one to know: born in Jamaica, educated at Charterhouse and Nottingham University, he was an economist and a banker before becoming a property developer and designer when he co-founded Finchatton in 2001, in the wake of the dot-com recession with school-friend and business partner Andrew Dunn.
Together, the duo – both still in their thirties – has seen the firm quickly acquire status as one of the most prized developers in London: to date, the firm has designed, managed and financed more than £1 billion of development projects, from Europe to the Caribbean, the Middle East and Australasia (the company has also completed ‘over 75’ private commissions, we are told), with another £1.3 billion worth of development in the pipeline (it also kits out mansions, penthouses, private jets and yachts).
This privileged position makes their insights worthy of note: Michelin explains that a scarcity of ‘best-in-class’ properties has provided protection from pricing pressures, or even led to small increases: ‘Anything secondary is struggling to sell at all – regardless of price.’
The firm’s current work supports that trend. The company is currently coordinating the redevelopment of the former US Naval Headquarters at 20 Grosvenor Square, due for completion next year. Meanwhile, its most recent development, Kingwood – a multi-storey collection of super-prime apartments on the coveted Hans Place in Knightsbridge, just behind Harrods – is aimed, of course, at the kind of value-hungry, quality-minded foreign UHNW family that Michelin increasingly sees flooding in post-Brexit. They continue to be drawn in, the Finchatton man says, by a combination of favourable exchange rates and market uncertainty. This continues to create opportunity.
While Michelin cautions that the final form of the UK’s post-EU future is still a long way off, the general election result makes a soft Brexit likely. The discount in sterling has also priced in the ‘worst-case to medium-case risk’ – making this the time to buy. He explains: ‘If we get a better deal in Europe [than expected] then my view is sterling will strengthen quite a lot, and actually that opportunity and that arbitrage you have now for the dollar-based or international buyer to buy in London at a good discount will evaporate very quickly.’
In the end, he remains buoyed by the bullish view of the billionaire class – and the booming business that backs up his projections: ‘I think the UK will be a leaner, more efficient place to do business after we leave Europe. There might be some pain in the short term, but my sense is we will be better after.’
It will be interesting to see where the numbers stand in a year’s time – and if the latest boom is more than just another bubble.
Matthew Hardeman is assistant head of the Spear’s Research Unit