Q&A with Jacqueline Hopkins
CEO of Plum Property Solutions Ltd.
Q:As an industry insider of the real estate market in the UK, and especially in London, Jacqueline, could you briefly introduce yourself and the company you are working with?
As is often the case with careers, I evolved into my current role as CEO of Plum Property Solutions Ltd. After a classical design training at university in France I was lucky enough to have worked on some of the most prestigious commercial and residential design and build projects in London and Europe which gave me an incredible insight into all aspects of real estate from being able to purchase property cleverly to adding value to it and maximizing its capital appreciation and income yield.
I realized there was a need for a company that specialized in ensuring the purchaser's interests were safe guarded when buying real estate on what is virtually the o the other side of the world; a company that only worked in the purchaser's interests and that could provide the due diligence and experience to ensure that each and every property purchased was a sound investment in the right location and negotiated keenly. This is exactly what we do at Plum.
Could you give the readers of Invest In a big picture of the current real estate market in London? Are there any new polices, regulations and restrictions that you want to highlight for foreign investors, especially Chinese investors?
The current real estate market in London is buoyant and has defied the financial downturn seen as a result of the debacle of the US sub-prime real estate drama which snow-balled across the western world.
The reasons for this are based around London being seen as a highly respected and established European city. Politically the UK is stable and tolerant with a very straightforward legal system with regards to tenure of real estate. Physical accessibility is a key factor to London's popularity as is our appeal as a leading light in education with some of the best schools and universities in the world in the UK. Sterling's depreciation has contributed as well to foreign investment in the UK real estate market. UK residential real estate has delivered better long term value growth than any other investment asset class over a thirty year period. It is set to continue in London as there is a real long term shortage of supply versus population. Classic economics really - supply versus demand.
As I mentioned earlier, tenure of real estate is transparent and straightforward for foreign investors. The Chancellor has however recently introduced some stringent measures affecting property purchased over the 2m GBP bracket through a Company or an off-shore trust for personal use only. They have increased the stamp duty paid on such property to 15% and have introduced an annual levy as well. I stress this concerns real estate for personal use and does not affect real estate bought on a commercial basis. We have excellent tax advisors and consultants that we can recommend to our clients to ensure that the correct vehicle is used to purchase real estate to suit the differing requirements of our clients.
The secret is to plan carefully in advance and get the right advice from the start.
What is the standard process/requirement for a Chinese to buy properties in London? What's the strength that London stands for compared to other markets in the EU or North America, as they are popular investment destinations for Chinese investors?
Buying real estate in the UK is not a complicated process.
We have two stages: once an offer is accepted a solicitor is employed who essentially checks the title deed and ensures there are no hidden problems associated with the property or its environs which culminates with an Exchange of Contracts where sometimes 5% but more usually 10% of the purchase price is lodged with the solicitors to bind the deal. This is followed by a Completion of Contracts where the balance is paid and the title deed is transferred into the new owner's name and subsequently registered with the official government body called the Land Registry.
London is seen as a very safe haven for investors and is more popular than any other European City. It is established with a strong and varied cultural identity, as Dr Samuel Johnson wrote three hundred years ago "To be bored of London is to be bored of Life"
English as a language is also still the lingua franca of the world which contributes to its appeal. Canada and North America are, in my opinion more lifestyle destinations. What you have with London is a wonderful combination of lifestyle and solid investment credentials with great accessibility to the rest of Europe and indeed the Far East with daily direct flights from Heathrow airport.
What do you think are the pros and cons to invest in London's real estate market? Any market data or analysis to support your points of view?
I believe the major mistake a lot of investors make is to believe that all real estate in London is good real estate. There are a lot of places, as in all major cities, to avoid. Even in supposedly prime central locations there are streets where you would not want to walk alone at night. The other major mistake a lot of investors make is to over pay for a property by buying at exhibitions without ensuring proper due diligence is done.Don't get me wrong here, there are some fantastic UK real estate developers who bring their projects to sell in China and I work very closely with them. I'm just passionate about realistically checking that the figures stack up from the initial asking price to the expectant rental yields.
The big advantage to investing in the London property market is that there is lots of opportunity to buy into areas where regeneration is already agreed and large capital uplifts over a comparatively short space of time can be achieved. Even in the very smartest postcodes there are pockets of opportunity where landed estate owners such as Grosvenor Estates invest in improvements. Plus there are emerging districts where prices have not reached their full potential.
Those who embrace new areas and frontiers are often are rewarded for their boldness, like those that bought into Docklands in the eighties or South Bank in the nineties or King's Cross at the start of the Millennium. Nine Elms and Vauxhall is tipped to be the next hot shot area with prices estimated to rise from 800 GBP per square foot to 1,800 GBP per square foot by 2016. There are other areas such as Paddington and Bayswater and the postcodes embracing the new Crossrail transport link from of London to the City estimated to rocket in price by 2016. Hammersmith, Shepherd's Bush, Earls Court, City Fringe, Fitzrovia are a few other key areas that are set to increase by the same time as well.
Each and every member of the Plum team is passionate about their job and knows London like the back of their hands.We monitor each area constantly so that we can advise on the key developments in the key areas to buy into to maximize capital appreciation and rental yields.We really can help our clients and we have no other vested interest whatsoever.Our service actually saves our clients money by the way we negotiate on their behalf.
What are the taxes involved in buying a property in London?
The taxes associated with buying a property in London are called Stamp Duty Land Tax or SDLT for short. This is paid to the government. The scale of stamp duty is as follows:
Can you also briefly elaborate any policies that would allow a Chinese buyer to apply for residency in the UK, according to our knowledge; this could be one of the main concerns for Chinese HNWI's to invest overseas.
Chinese nationals from Mainland China need a visa to travel to the UK. The UK offers a variety of visas to suit the individual's requirements and the intended length of stay in the UK. From "just visiting" visas and student visas right the way through to "entrepreneur " and "exceptional talent" visas. For HNWI's wishing to apply for residency in the UK there are "investment" visa options whereby an applicant must have 1 million GBP of their own money invested under their own name in a UK institution or 2m GBP in assets in the UK. The visa lasts for three years and 4 months.
Depending on the level of investment made in the UK, the investor visa holder may gain permanent settlement rights in the UK after 2, 3 or 5 years. For settlement after 2 years, an applicant must show 10 M GBP of funds at their disposal in a UK bank or institution or net assets of 20 M GBP and minimum loan capital of 10 M GBP. For 3 years, the equivalent figures are 5 M GBP or 10M of net assets and for 5 years, the equivalent figures are 1M and 2M. It would also be necessary to show that during the period of the person's residence in the UK (which must be a minimum of 180 days per year, the person maintained their level of investments throughout the initial investment period and that the person has sufficient knowledge of the English language and the UK way of life). Settlement rights for the individual's family are taken into consideration at the same time. This is just a summary of the key requirements for residency but we can put anyone of your readers in touch with the best legal and tax advisors should they require any further information on residency in the UK.
According to your expertise, where in London are your recommendations to buy a property, and why?
We touched on this question above. We have detailed reports of all the hot spot areas in London which we monitor exactingly to find innovative real estate opportunities for our clients. We'd be delighted to supply in depth reports for your readers should they be interested.
Are there any other suggestions that you want to tell our readers when considering buying a property in London? What are the risks they should take and how to avoid them?
The key advice I would like to reiterate is to remember that not all real estate in London is a good investment. Careful due diligence is required to ensure successful property portfolios are achieved. It is also important to remember that it is not always the prime central locations that will deliver the best performances in the foreseeable future. A lot of our clients initially want to invest in property they themselves would be happy to live in and this is not necessarily the best way to buy investment real estate. We often have to encourage our clients to think laterally and to buy into real estate where there is a rental demand from a specific demographic group