Real Estate Investor Magazine South Africa April 2014 | Page 56

UNITED KINGDOM

BY SCOTT PICKEN

London beware
Tax is trebling on the 1st April 2014

I

lived in London for nine years and know the
market ver y well. I have invested in many
properties there, but I do feel that there are some
important components which need to be understood
and explained why I am not investing there. Lets
look at the positives. Bottom line is that it is the
number one international city in the world, there is
more demand than there is supply, there are many
migrant workers which provide tenant demand and
the economy seems to be recovering.
However for me there are more fundamental items
which need to be considered: fundamental concerns
with the market there and why it is in the ‘low return,
high risk category’.
The first major concern is that the economy is based
more than 70% of the GDP on banking and insurance.
These industries are transient and with the British
government wanted to tax high net worth individuals
more and more, at some point these industries can
easily move to better locations to operate from.
Secondly in terms of value, the UK propert y
market and in particular the London propert y
market is the most expensive it has been ever.
According to David Brown, commercial director of
LSL Property Services, the average prices were up
£1,348 in January 2014, setting a new record high

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April 2014 SA Real Estate Investor

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for 17 months running. This is fuelled mostly due
to much increased activity, with growing demand
for property buoyed by low interest rates and Help
to Buy, combined with hot competition for homes.
Especially in the top end of the market in London,
there has been a buying frenzy by foreigners as they
have tried to pick up trophy properties in London
and the growth has witnessed this. Anyone who is
sophisticated in property investment though, will
understand that whether you are talking about

residential or commercial, all property should
be valued based on income.

Whenever people go after capital growth it is like
betting against win