Buying Property In Central London
RICHA KARPE
Diversity plays an important role not just in asset allocation but also risk allocation-especially geo-political risk. These are uncertain times with china flexing its muscles, North Korea as volatile as ever, continuing concerns about Pakistan and heightened tensions in the Middle East. Therefore wealthy individuals unsurprisingly look for stable stores of wealth across the globe.
Consequently many UHNIs including wealthy Indians have been acquiring property in prime central London as it is an attractive option for numerous reasons
WHY CENTRAL LONDON?
Acquiring property in UK for a non-resident/non-domicile is very tax favourable. One can mitigate potential taxes associated with property purchase provided the appropriate structure is used for acquiring the property.
It is a major financial centre, but is also one of the most fun cities in the world. Most importantly of all UK is politically stable and there are clear and strong property laws. There are a few cities in the world that can boast such a rich combination of culture, cuisine, shopping, entertainment and nightlife while also being a major financial center. The recent devaluing of pound versus major currencies also means that for a non UK investor he is looking at around 15 percent correction in property prices. Capital preservation is the major motivation for buyers rather than investment returns. The worlds sophisticated elite know that owning a prime property in Mayfair, Belgravia or Knightsbridge has represented wealth for centuries. This is unlikely to change unless something catastrophic happens-hence the need for geographical as well as asset diversification. If there is to be crash one must realise that the big fall will take place on low transaction volumes, i.e. only those who absolutely have to sell will and it will be very unpleasant-buyers will wait for further falls while what little mortgage funding there currently is will almost certainly evaporate is will almost certainly evaporate in the face of bad news. Those who have bought secondary properties or in secondary areas and have overstretched to buy a prime property will get hurt if they cannot ride out the strom. As mentioned, prime central London is relatively insulated from this by the large number of cash buyers and low mortgage loan to values. However, there are still those who have overstretched.
RBI LRS?
Under the RBIs Liberalised Remittance Scheme, a resident Indian can take out USD 200,000 per year. This means that a family of 5 can take USD 1 million out every year. This money can be used to purchase a property or to make investments etc.
WHAT SHOULD YOU DO?
It is entirely possible that one has seen the worst of the financial crisis and prices in prime central London will continue to rise. One must consider the reasons for acquiring property carefully. Many are acquiring property carefully. Many are acquiring property as they wish to have a London home, business base or an addition to their international portfolios. It is important to note that the majority of buyers for whom their London homes denote a small proportion of their overall net wealth. So, if you are considering stretching your finances then you really must consider the risks.
by: Adam Smit
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