Despite geopolitical shocks, real estate capital flows look well supported by the global economy; while investor confidence is notably improving in housing markets around the world.

The improvement in demand indicators, in spite of Brexit, provides grounds to believe that the prime central London market is set for at least a modest recovery in trading volumes. Whether this translates into significant price rises is less clear, although according to a RICS (Royal Institution of Chartered Surveyors) report, housing prices will rise by 3.3% a year for the next five years. Moreover, the average price of a home in the capital inched up to £484,716 in July 2016, making it 12.3% higher than a year previously, according to latest data from the Land Registry.

In conversation with ASHLEY OSBORNE, Head – UK Residential and Managing Director-International Properties, Colliers International, on the realty market in UK, with special focus on the London market:

GRIHA: What is the UK’s current real estate market scenario?

ASHLEY OSBORNE: The UK residential real estate market is underpinned by a significant lack of supply, and ever increasing demand due to a growing population. Prices continue to rise, especially for homes in London and other major UK cities. Those within areas earmarked for regeneration, close to major public transport systems, built by developers with a strong track record and with good access to amenities are where we see the greatest level of demand, most notably from investors.

GRIHA: After the Brexit, how has UK’s real estate market been affected?

A. OSBORNE: There remains a high level of speculation over the impact of Brexit on prices of UK, and most notably London, property; and while it may be too early to discern its likely long term impact, in the past few months following the initial shock of the UK’s vote to leave the EU, we are witnessing strong signs that initial fears that the vote would cause a downturn to the housing market have been defied, and confidence is now returning to the market. This has been indicated through rising enquires with estate agencies, and an increase in sales transactions and mortgage approvals. The biggest impact from Brexit to overseas property purchasers is the fall in the value of the Pound Sterling. We consider buying opportunities will be ripe for Indian investors following the significant fall in currency value. This creates an excellent opportunity for international buyers to benefit from currency gains as the Pound strengthens over time.

GRIHA: What has the growth rate been in the real estate market, despite the housing shortage in the country?

A. OSBORNE: It is becoming clear that the current conditions in the UK housing market are unlikely to be a temporary phenomenon. In London in particular, household growth per annum is expected to be around 360,000 till 2020; but with supply at less than 200,000 new homes per year, the result is approximately a 45% shortfall in the number of new homes required. This lack of supply is expected to put continued upward pressure on house prices.

GRIHA: What is the market outlook?

A. OSBORNE: Sentiment among our buyers remains positive and we expect steady growth in prices. Fears that Brexit would cause a dip in the UK housing market have not materialized. UK’s fundamentals as a global leader and world class city in London remain unchanged and the continuing demand for quality housing throughout the country keeps growing against what appears to be further restrictions in supply.

GRIHA: What can Indian buyers-investors expect from the UK real estate market?

A. OSBORNE: There is strong demand for property in London due to the attractive yields and levels of capital growth. Some buyers are looking for investment opportunities outside of London purely due to the lower cost of purchasing a property in places like Manchester and Birmingham.

GRIHA: How do you compare the Indian real estate market with that of the UK?

A. OSBORNE: The UK real estate market well evolved, provides lower yields, but offers strong prospects of steady capital growth within what is effectively a ‘safe haven’ for investors. India’s market is developing, there are opportunities for investors to benefit from higher yields, but there is also a higher risk to consider. There are also more restrictions for property investment in India, especially for foreign buyers.

GRIHA: What is the share of Indian investments in the UK’s real estate market?

A. OSBORNE: In the UK, foreign ownership of residential property is concentrated in the capital. The reasons for this are that London is a global city, and thus attracts globally diverse workforce who are able to purchase their own home. When it comes to Indian purchasers in London, we estimate that they account for around 3% of all purchases by overseas buyers; these are ones who have residency in London and are thus buying as end users. A further 1.5% are Indians who are buying for investment purposes and do not reside in London. Outside of the capital, we consider many Indians would be purchasing homes in University cities for their children who may be studying there, or in other major cities due to family or business connections.

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