Among the highest number of property owners in London, Indian investors are ready to shell out GBP 290,000- 450,000 for a close-to-completed and completed projects, said Barratt London. Besides pleasant weather and shorter travel time as compared to other overseas potential markets, and good educational institutions, the city is popular among Indian investors and homebuyers. “Indian investors consider residential assets as an easy investment for capital growth or rental yields,” Stuart Leslie, International Sales and Marketing Director, Barratt London, told FinancialExpress.com. A total of 3.5 per cent of sales for Barratt London comes from Indian homebuyers.
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“The reason Indians are comfortable buying properties in the UK is because of the market fundamentals and confidence along with a history of Indian investing in houses in London. They also get better returns owing to the exchange rates and market presence and UK is currently a safer market in comparison to UAE or India,” Stuart Leslie said to Tanya Krishna in an interview. Here are the edited excerpts.
How is residential real estate performing currently? Where do you see this segment in the next 5-10 years?
We are seeing extremely strong indicators – both historically and for the medium to the long term future, with an influx of overseas buyers looking to purchase property in London. The domestic buyers are active as well. The pandemic made it impossible for people to move homes or buy investment properties owing to restrictions. Now that the restrictions are lifted, we have a large number of queries from both existing and new buyers. Investors are looking to take advantage of the rental market, which is going very strong at the moment. For instance, the average time for a rental property in London presently is about 3 weeks. Practically speaking, our local agents are getting multiple offers on the same property, indicating a high demand in the rental market. We are still seeing historically low-interest rates, even though they have risen a bit.
Historically, strong market players usually belong to the Southeast Asian region, with Hong Kong, Singapore, and Mainland China being strong players in the UK markets. Barratt is interested in seeing the trends in the next strong market and India by far is one of the strongest markets we see long-term growth in, with overseas investments rising from India. Another strong player is the Middle East, with investors from Saudi Arabia, Qatar, and Kuwait. There are good investments coming in from Russia, Ukraine, Azerbaijan and Kazakhstan, but it has reduced right now due to political instability.
What is the composition of your client base – both domestic and overseas?
Outside of London, 99 per cent of our product is sold to UK residential buyers, who buy these properties and live in them. In London, 30 per cent of our overseas sales are to pure investors – those who wish to use them as rental properties. This year, we have seen growth in the percentage of Indian homebuyers, who make up 3.5 per cent of the overseas market players. We are really reacting to where the demand is coming from rather than speculating and looking for business.
What kind of money are they mostly willing to shell out for buying homes?
Residential properties in London have lower prices. We drive more affordable properties in London as compared to others, who promote luxury properties in the capital city. Our property prices will start from about GBP 290,000 which are prices people don’t normally associate with the London market, but with tier-II or tier-III cities. This price makes people want to be more London-centric over other markets. Our product average price is about GBP 450,000 across our London portfolio.
What are the preferred locations in the UK for homebuyers?
Over the past 2-3 years, we have seen developers taking out products in tier-II cities such as Liverpool, Manchester, and Birmingham. They are promoting high rental yields and returns. However, what people don’t really look at is that investors care more for the overall return on the investment over rental returns – more emphasis is on how much money you are putting in versus how much are you getting back. Therefore, prices in these cities shot up as people invested more. When we take out our affordable product, people realise that they can get a property in London for the same price as these cities, they tend to prefer London. Another thing to note is that if we compare Liverpool or Manchester to a suburb in East London, it has a larger population than Liverpool or Manchester. So, people realise that they can rent to more tenants in London as compared to these cities.
What kind of ROI are homebuyers looking at when they invest in London?
Over the last 30 years, there has been a steady price growth, of about 9.5 per cent in London. The market has flattened in the past, in 2008 during the Global Financial Crisis and then during the beginning of the pandemic. However, it never went down. If it is a cash purchase, the ROI should be about 12-13 per cent inclusive of capital growth and rental yields. If overseas investors have the opportunity to leverage property through a residential mortgage, then the ROI goes up exponentially. Once the property is rented out, you get around 5 per cent returns as rental yield. As an overseas investor, your mortgage is costing around 3 per cent. Capital growth occurs due to the regeneration effect due to infrastructural developments. So, it is not unusual to get over a 100 per cent ROI just because of the market fundamentals. At the same time, the ROI depends on a variety of factors – the safety of investment, price growth, rental yields, confidence and deliverability on account of the developer as well.
What are your plans for expansion? What kind of investments is Barratt planning to make?
Barratt is acquiring more land in London strategically. We are buying more land in areas where we can deliver maximum value to our customers, in zones 3-5, which is around a 25 minutes commute from central London. One of our projects in Bermondsey is within walking distance from Tower Bridge. We’re also working on regenerating old properties, one of which is a regeneration of a chocolate factory. There are about 1200 units, 20 per cent of which are delivered. We are also bringing projects through our channel partners to India and are hoping to talk to investors. We are targeting to deliver 2000 properties a year in London, and have invested about GBP 1.2 billion in new land acquisition. We have a strong pipeline of upcoming projects, driven by market fundamentals, and want to raise our acquisitions a lot more in the next 12-18 months.