(The above posting was mostly from a website WARNING people about overpriced London property):
Wealthy Chinese being duped into buying overpriced London properties
Far Eastern Buyers are paying prices which are 20-30% beyond what locals are willing to pay, often for expensive new properties in undesirable parts of London. Typically these properties are slated for completion in 2013 and beyond, and the buyer will expect to rent or resell upon completion.
Sadly for the poorly-informed foreign buyers, the rental assumptions being supplied by the vendors and their agents are pure fantasy. Typically the estimates are based on the sort of yields that an owner of a new property would want to achieve rather than any systemic analysis of the actual rental transactions. The vendors almost never back up their estimates with hard data showing what secondhand properties in the local area are presently achieving as rentals. Moreover, the impact of a large number of similar flats being suddenly available on the market (when the property is completed) is rarely considered.
"Rental guarantees", where offered, are typically mere sales gimmicks whose cost is most-probably funded by increasing the sales price. At the end of the guarantee period, the property owner may be facing a substantial drop in yield.
Finally, Buyers are not sufficiently well-informed to see when the vendor's sales prices are far in excess of secondhand sales for similar quality properties in the same area. Blackheath does not achieve the same prices per square foot as Kensington, or even as Islington.
The Coming Overhang
Flats being purchased by Far Eastern buyers may represent an important future source of supply, which will help to hold down rents or push down prices when the disappointed buyers unload them. Very few of the buyers expect to live in the flats themselves. In some cases they may be hopeful that their children may use them as accommodation while they are studying in universities in the UK. (A spell in the UK is expected to improve the English-speaking abilities of children, while improving their future job prospects.) But that sort of demand may be temporary, or may not occur at all if their children fail to get into the university of choice, or they change their minds about studying in the UK.
Rather than "squeezing Britons out of the property market", these naive buyers are likely to be providing British renters and future buyers with cheap property. Their purchases of expensive new properties are added to future supply at a time when Britons themselves were unwilling to buy new properties. Perhaps the typical smart Brit is wise not to compete, and are content to let the foreigners get on with risky investments at what may prove the top of the market. The feast will come later for the patient ones, who are waiting for the expensive flats to be unloaded at a loss.
It is the ill-informed foreigners who deserve the sympathy, not the "priced out" Brits.
(THAT "Editorial" was a response to a silly article):
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