Cast your mind back almost three years when property investors from Southeast Asia, particularly from Singapore, Malaysia, Thailand and Hong Kong, purchased investments in an off-plan riverside development in London.
The hype was incredible and only matched by the marketing efforts that resulted in more than half of the more than 800-plus units in the first phase of a Malaysian consortium-backed development at the iconic Battersea Power Station.
Most paid a 10 percent deposit and were sold the dream of substantial capital gains if they wanted to flip their investment during construction, or better-than-average rental returns for London if they opted to keep and use for rental income.
That dream is now turning into a nightmare for some property buyers and investors.
According to media reports in the U.K., further developments in the area have resulted in a huge supply of new-build apartments.
Currency rates have gone in the entirely wrong direction for Southeast Asian investors, especially in the case of Malaysia, Thailand and Hong Kong where the majority of first phase buyers are located
Safe haven London is not turning into nothing short of a headache for many but-to-flip investors.
According to some U.K. media reports the Nine Elms area of London that encompasses Battersea Power Station has 54,000 units under construction, and official data showed than 30 percent of property for sale in the area has been on the market for more than one year.
Time is running out for the “flipping” investors before final payments need to be made, or deposits sacrificed. Going through with the transaction, in the case of a Malaysian buyer for example, will mean paying stamp duty as well as shouldering the 30 percent decline in the value of the rinngitt versus the British pound that’s happened during the last three years.
On top of that, average prices within the London postcode have fallen by about 16 percent in the last year alone, according to real estate agency Foxtons.
This example, whilst extremely sad for those involved, shows how every single factor needs to be taken into account when purchasing overseas property – even when it’s backed by a government.
