Real estate in London is one of the most expensive in the world, but when it comes to average prices, all companies and experts give completely different figures. George Shishkovsky, managing director of a British company LondonDom, tells portal ee24.com about real cost of housing in London and how much you can earn on it per year.
About real estate prices in London, which are always growing
"During the crisis, prices have fallen by 15-25% depending on district, but by the end of 2009 they began to increase, and a few years ago, the pre-crisis records were surpassed. We work in medium and high segment of London market, and now the prices in good locations are in the range of €10,000-80,000 per sq.m. On average, you should count on €25,000-30,000 per sq.m. By the way, the Russians prefer to buy expensive real estate in the prestigious marketable areas: they’d better pay more for a smaller property in the center, rather than for more square meters somewhere in the outskirts.
We have just resold several contracts for apartments under construction in prestigious building "Riverlight" overlooking Westminster. Great place, one of the best developers: the USA was right to choose this area for construction of the new embassy, which will end in 2017. Our clients bought an apartment in August 2013 on the stage of excavation works for £1.1 million, and now we managed to assign the contract for £1.35 million, so annual growth was 22.7%. Of course, such an increase in profits is the exception rather than the rule, but in many other cases, it also turns out quite solid.
Riverlight
About the structure of demand: what kind of real estate the Russians buy in London
The Russians mainly buy apartments: they are easier and less expensive to maintain. Usually these are two or three bedroom apartments ranging from 100 sq.m. Many customers buy the second and the third property with us, and all these properties are not necessarily in the same district of the city.
The Russians always prefer new buildings. London is a historic city; many buildings are protected by the state, or considered to be the monuments of history and architecture, so there are problems with redevelopment. There may be old pipes, plumbing, wiring, windows. Of course, the Russians do not like all this: it is easier to buy a new property. However, there are people who, on the contrary, look for old houses in the city center, but most people prefer to buy properties at the construction stage, when it is possible to get a mortgage or pay by installments.
We did not feel any outflow of the Russians due to political and economic events in early and mid 2014, and maybe even on the contrary, the number of customers increased slightly. Nowadays about 60% of buyers are from Moscow, 10-15% are from the regions, usually from cities with population exceeding one million, but not "oil capitals" such as Tyumen and Surgut. Other 10-15% of customers are citizens of Kazakhstan, the rest are from other countries.
The Russians buy apartments in London for two purposes: about half of them do it for themselves, and others - for rental, resale, or assignment of a contract... However, not everyone who buys for himself, is actually going to live in the UK: many of them buy property for children to live during their studies or for themselves, for rare trips to London.
About the Chinese in London
70% of apartments in new buildings in London are sold to foreigners, and about 7-10% of them are the Russians. Many buyers are from the Middle East, Hong Kong, Singapore and China. In China, as far as I know, there are restrictions on purchase of a second property in the country, so people have to take out extra money and invest in other countries. Some time ago the Chinese bought cheap properties in small cities in the UK, but now they much more actively invest in London, especially in luxury segment. There are even Chinese developers, who will build 70-storey towers in the heart of London.
About profitability of real estate
Real Estate in London does not provide as much profit as emerging markets. It is about 4%, but it is profit from renting out only, but your square meters also rise in prices. I’d like to note that if you deposit your money in a British bank, the rate will be less than 1% per annum.
About taxes and documents
The highest expanse for buying real estate is stamp duty. It is 4% for transaction amount up to £1 million, 5% - from £1 million up to £2 million, 7% - over £2 million. Transaction of real estate purchase in England must be supported by a British lawyer, and it is better if the company is registered in the Law Society, which confirms its competence and reliability.
About lifestyle: buying or renting?
Unlike the French and the Germans, the British have historically preferred to own a house, but it becomes more difficult for the young to buy real estate, competing with international investors. Therefore, there are government programs "Help-to-buy" for the young. They will help to get grants and interest-free loans. These benefits are for those residents who buy their first property in the UK for up to £600,000. But the British should better hurry up: perhaps the program will soon be over".
Interview: Kirill Ozerov, ee24.com