UK and Canada to be the perfect destination
Despite tumbling transaction levels and ongoing political uncertainty sending tremors through the prime central London (PCL) property markets, the U.K. is still a compelling place to invest, says the head of Christie’s International Real Estate.
“The U.K. market will always be a strong market…you have a depressed currency…soft prices and low transaction volumes. So it’s true supply is lower, people have taken properties off the market but I think the U.K. is a great buying opportunity,” posited Dan Conn, chief executive officer (CEO) of Christie’s International Real Estate, speaking on CNBC’s Squawk Box on Wednesday.
“There are also pockets of Canada that I think are great buying opportunities…London, Vancouver, Toronto, these are all great places to live – you don’t get away from that dynamic” he added.
Conn’s optimism over the U.K. luxury market comes alongside a full acknowledgement of its weakness in recent times, with the CEO noting that it has been eight or ten years since volumes have been so low.
“The reality is if you look at prime central London in particular, the volumes are materially off of where they’ve been throughout the run up,” he highlighted, adding that if sterling continues to stay weak, propelling further inflation and potentially interest rate rises, the U.K. government will need to return to the drawing board to determine what it must do to foster a solid property market.
Sterling dropped sharply to a multi-decade low in the immediate aftermath of the Brexit vote last June and now languishes around 14 percent below its pre-referendum level.
In Conn’s view, the stamp duty changes in the U.K. that have been blamed for greatly skewing the PCL market’s performance in 2016 have now largely been absorbed, as is the case for Vancouver (Canada) which added a 15 percent tax for foreign purchasers and Hong Kong, whose prices were also walloped for a period by taxes. Toronto (Canada), whose breakneck speed of property price increases has seen it recently shoot to the top of global house price inflation surveys, is the next city geared up to experiment with such measures.
Hong Kong’s rebound – which sees it now sitting at the top of Christie’s luxury property index having reported four residential sales above $100 million in the past year – is driven by two key factors, says Conn.
“If you’re in mainland China and you’re thinking about where to deploy your capital, you have to find a safe place to invest. The policies that you’re seeing from a number of governments in what were attractive target markets are not so foreign investor friendly,” he explained.
“So part of it is just trying to find a safe place for capital and part of it is a currency hedge.”