Indian buyers eye London property after investment rule change

Buying agency reports surge in enquiries after relaxations in overseas investment rules

Since the beginning of 2017, 30% of our new buyer enquires have come from resident Indians. We believe this uptick is being driven by relaxations in the rules governing how much money Indian nationals can send abroad for overseas investments, including property. From 2015, the annual limit per person was raised to $250,000 – meaning that a husband and wife can remit $500,000 each year, and a family of four, $1 million. Indian nationals who have been taking advantage of this so-called Liberalised Remittances Scheme are now at the point where they have accumulated sufficient funds offshore to begin investing in London’s property market. 

Enquiries so far reflect the limited amount of time that has elapsed since the limit was raised, with Indian buyers tending to look for property around the £1 million mark, either as a pied-a-terre, or as a buy-to-let investment to provide portfolio diversification. We expect this trend to continue, given the historic links between the UK and India and especially with Indian entrepreneurs seeing opportunities in the UK post Brexit. 

There is a large amount of sand in the gears

At the upper end of the London market, there is a large amount of sand in the gears. Falling prices in recent years are deterring all but the most determined seller. Hikes to Stamp Duty – particularly in the £2m-£6m part of the market, have substantially increased transaction costs. Stamp Duty on a £5 million property now comes in at over £500,000. With tax at this level, buyers are extremely cautious. Without big rises in capital appreciation, buyers would find themselves nursing substantial losses once tax outlays are factored in, if they are forced to sell. This nervousness is understandable, but we would suggest that there are nonetheless opportunities to be had, for the committed and fleet of foot. First, while there is less supply coming to market, those who are selling are highly motivated, and vendors now know that they have to be realistic on pricing, and be prepared to negotiate. This means that buyers can strike bargains. This is especially the case for cash purchasers who are able move more quickly than those seeking finance, making them a preferred option for sellers who will often take a lower cash offer.

Secondly, those buyers in a position to take the longer view should put Stamp Duty charges and shorter-term market volatility in context. For all the uncertainty about the next year or so, property analysts expect 15-20% of capital appreciation over the next five years.