Doing it for the kids: foreign parents snap up London properties

November 26, 2013

Investors wanting London’s booming housing market for their portfolios and the city’s universities for their children are killing two birds with one stone.

A real estate firm specialising in the Fitzrovia area of the capital, close to several of its leading colleges, says that 28 percent of all sales this year were to parents buying properties for their children, almost double 2012’s figure of 15 percent.

And it is the foreign parents that are buying most: three quarters of parents purchasing for their kids were from abroad, and such purchases accounted for 34 percent of all sales to foreigners.

The trend is set against a larger backdrop of rising foreign buying in the capital. In 2011, British buyers used to make up 65 percent of Hudson’s customer base; just two years later, foreign clients take up the same proportion.

And instead of blowing millions on status mansions, buyers of properties for their student children tend to target the 400,000 to 1.5 million pound price range, request long leases, and are looking to maximise their returns.

“Often they’re looking for a multi-room property so they can rent the other rooms out to their friends and get some rental income from that,” Simon Bray, sales director of Fitzrovia-based firm Hudsons Property which gathered the data.

“They’re very sharp and they’re looking to the investment angle at all times.”

Fitzrovia’s location gives inhabitants easy access to London’s prize institutions including University College London and the London School of Economics.

And when the college kids graduate and start work, a convenient apartment may be the gift that keeps on giving, especially as London house prices soared nearly 10 percent year-on-year in October.

“A lot of them just want to get on that ladder and not miss out if it continues to go up at the rate that it has,” Bray said.

Buyers looking for an easy bet may need to act fast. The British government has hinted that foreigners buying properties may soon be hit with capital gains tax, a duty on the profits from the sale of an asset which has increased in value, which already applies to British second home sellers.

“It would certainly affect the market,” Bray said. “You might find that it gives UK buyers a little bit more strength against the overseas buyers.”

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