Coveting London’s desirable zones, golden postcodes

Foreigners buying property in the UK usually have locational preferences

There is a clear preference for location among overseas buyers of London properties. Those from the Gulf usually go for high-value dwellings in Mayfair, Belgravia, Sloane Square, Kensington and Chelsea, while buyers from the Indian subcontinent prefer the area around Oxford Street, Marylebone, St John’s Wood, and north London. Draw concentric circles around these corridors and you get the areas of choice of such buyers, agents say.

Another way to track and identify preferences is London Underground’s map, divided into six fare zones. The costliest properties are in Zone 1, with prices progressively lowering as you go outwards. Investors are known to prefer the golden postcodes in Zones 1 and 2, ideally in close proximity to a Tube station. Properties and new-build schemes along the Thames are also popular, besides government-driven regeneration schemes, which guarantee that nearby public spaces would be attractive, such as those redeveloped in east London during the 2012 London Olympics.

There is recent evidence that some overseas buyers will look outside London to the ‘commuter belt’ villages and towns, which are about 1 hour travelling time from central London. Such locations include Milton Keynes, but there is little to suggest that overseas demand has shifted to Zone 3 and beyond. It is central London, the area within Zones 1 and 2 that is the most coveted, reflected in the many languages spoken on the streets, supercars, and Michelin star restaurants offering international cuisine and shopping activity. The area has several tourist attractions, including sylvan parks such as Hyde Park, Regent’s Park, Green Park and St James’s Park.

There are few estimates of the scale of overseas investment in property outside London, but it is widely accepted that the scale of such investment is much lower outside the capital. Industry forecasts, however, say this is likely to change, given the increased interest in towns and cities such as Manchester, Bristol, Liverpool, Leeds and Birmingham.

Besides the emerging hotspots, London’s satellite towns such as Slough and Maidenhead are being marketed to Chinese and other international buyers. Liverpool, for example, is reported to have received millions of pounds of overseas investment in housing and property in recent years, while Sheffield some time ago announced a multibillion pound deal with a Chinese construction firm that would generate at least four city-centre projects and create a large number of jobs in south Yorkshire.

Outside London, latest estimates suggest considerable foreign investment in Manchester and Birmingham. Both have been investment hotspots for some time, with Birmingham described as a ‘standout performer’. Manchester continues to offer more opportunities to overseas investors. Low average house prices compared to London and higher returns have generated increased interest from Middle Eastern and Asian purchasers in recent months.

A leading European business destination, the ever-growing Manchester has attracted more foreign direct investment than any UK city outside London. Regeneration activities continue across the city, including a £1.4 billion development which began in December 2020. The city has also attracted young professionals in high numbers, particularly those who cannot afford to live in London, or the established Londoners who seek more residential space for money than is available in London.

But a familiar story is being played out in Manchester, where there is rising concern about foreign investors snapping up property in the city centre, leading to a spike in prices that most locals cannot afford, particularly the young who are keen to get on the property ladder; besides, several such flats are reported to be unoccupied. The young population in Greater Manchester means rental demand remains high, with demand outstripping supply.

There is a new category of overseas buyers of property usually below £ 1 million, mostly outside London, from Hong Kong, from where a section of the population has been allowed to migrate to the UK from January 31 this year in the wake of the UK’s row with China over changes to the former British colony’s governance. The Boris Johnson government allowed those with British National Overseas citizenship that was created in 1985 (before the 1997 handover to China) to migrate to the UK and eventually gain citizenship after six years’ residence.