London Update
Issue 44
Feature Article: London Marketplace Conitunes to Attract Foreign Direct Investment
Economic and Market Roundup
Regeneration News
Young Group News
About Young Group
Feature Article: London Marketplace Conitunes to Attract Foreign Direct Investment
Michael Charlton
CEO Think London
Despite fears that the global recession would reduce the level of overseas investment into the London marketplace this has not happened. Michael Charlton, Chief Executive of Think London, the official foreign direct investment agency for London, explains why the UK capital has proved resilient against the economic crisis.
In the last year or so, London has faced tough challenges brought on by the global downturn and has needed to adapt quickly to the new economic conditions. The ongoing priority for Think London has been to maintain the capital's attractiveness to overseas investors and to add to the 20,000 overseas-owned companies already based in London a challenge that we believe we have successfully risen to.
In 2008 London was voted Europe's number one business city for the 19th year running this has given Think London a measure to work against to ensure it retains this leading position. Our primary focus has been to deploy our expertise, networks and capabilities to promote the best that London has to offer. The ultimate success of course would be in the shape of London maintaining its first place despite the current conditions of the global downturn.
In March 2009, as part of the Mayor of London's Economic Recovery Plan, Think London launched the high-profile London Now campaign to spread the word among overseas businesses that London offers the best opportunities to both survive and thrive. Our first priority was not to lose sight of the fundamental features of London that produced clear benefits to overseas investors. These had not changed despite the downturn and included:
- London's leading position as a financial hub: every leading financial institution has an office based in the city, including HSBC and Lloyds of London. The city is also home to the headquarters of more than half of the UK's top 100 listed companies (the FTSE 100) and more than 100 of Europe's 500 largest companies
- Springboard to Europe: London is the gateway to the European Union's 27 member states, the biggest single market in the world, with a population of nearly 500 million
- Transport: five international airports, high-speed rail services to Paris and Brussels, and one of the world's largest over-ground / underground rail networks
- A skilled workforce: London is home to Europe's largest regional workforce - more than 9.8 million people, with one in three holding a university degree
- Truly multi-cultural: more than one in four Londoners today were born outside the UK and over 300 languages are currently spoken here
- Property: the city boasts an unrivalled choice of premises and facilities ranging from flexible office space to some of the world's most soughtafter high-rise addresses
- A lack of significant barriers to foreign business ownership in the UK - both the UK Government and the Mayor of London truly welcome overseas companies
These factors contribute significantly to why the London marketplace is growing at a faster rate than any other global city and is set to become the fourth largest city economy in the world by 2020. In order to reinforce the message that the economic downturn has in fact opened a window of unique investment opportunity for businesses to reap the benefits of the London marketplace, Think London has recently met with business leaders in the US, Japan, Korea, China and Australia, with a simple proposition: take advantage of the benefits in London now and be in a strong position for when the recovery comes. This has been supported by our Touchdown London offer, which was extended earlier this year to offer 12 months of free office space together with a dedicated advisor to support them through the process of establishing a London presence.
Think London firmly believes terms such as “economic slowdown” should be balanced with “economic opportunity”. The city now offers real value for money and provides one of the best and most productive investment climates in the world. With office rents in London down 38%, sterling's depreciation against most major currencies and now an even richer talent pool available, there is no better time to take advantage of all that London has to offer to maximise global potential and competitive advantage.
So, with efforts firmly focused on London maintaining its number one spot has Think London been successful? Well in the last year Think London has worked with 178 foreign owned companies from 26 different countries to help them choose London as a place to expand and grow their business. We are confident more will follow.
The US, India and China remain the largest investors in London, with the ICT sector leading the way for investing industries. Following a dedicated Think London campaign in China in 2008 which included the ‘Road to London’ - a 3 month roadshow of business events in China's top business cities, and ‘Connect to London’ - a Chinese business programme to inform potential investors how best to globalise their business, London has welcomed an influx of Chinese companies looking to set up their European operations here. These include the well recognised Alibaba.com, the online b2b marketplace, designed to make it easy for more than 40 million buyers around the world to do business online. Earlier this year, Alibaba.com relocated their European headquarters from Geneva to London a move that has already proved highly successful. More recently Think London has also assisted leading Chinese financial service institutions such as China Construction Bank, China Merchants Bank and China Union Pay successfully set up business in London.
Think London and London Mayor, Boris Johnson, in New York recently
It is an exciting time for London as we are now only 3 years away from hosting the 2012 Olympic and Paralympic Games. For London it is the size and scale of the Games that equals the size and scale of the opportunities available for any business coming to London. With 7,000 tier one contracts and a further 75,000 supply chain contracts available all administered through the transparent Compete4 procurement system, the Olympic contract opportunities are likely to act as a catalyst to a foreign companies to set up a permanent presence in London, creating local jobs and economic wealth.
Over the past week, Think London embarked on the second leg of its ‘Route to 2012’ campaign, a series of roadshows across North America, in partnership with UK Trade & Investment (UKTI), to present the fantastic business prospects the city has to offer and advise businesses how best to participate in the 2012 success story.
The first leg of the roadshow took place in June 2009 and took in the cities of Palo Alto, San Francisco, Los Angeles, Austin, Seattle and Dallas, successfully generating over 30 business leads. The aim of the second leg of the roadshow is to engage with companies from the sustainable and digital sectors in and around the cities of Atlanta, Washington DC, New York and Boston. The roadshow will culminate with an event in Vancouver during the 2010 Winter Olympics.
With the 2012 Games just around the corner, the future for overseas investment into London is encouraging. Following a particularly challenging 12 months, it is reassuring to know that London is at the forefront of dealing effectively with a global economic downturn. The strength of London's financial markets is highly dependent on its ability to attract overseas investment and fortunately, London's FDI looks set to remain relatively unscathed from the effects of the global downturn. We are now in a strong position to step up the momentum to maintain the cities pole position as the centre of globalisation and to retain its crown as Europe's most attractive city to invest in.
Michael Charlton
CEO Think London
Base Rate Remains at 0.5% for 7th Month Running
The Monetary Policy Committee held the base rate again at the beginning of September.
EuroZone Interest Rate Unchanged
Similarly, the European Central Bank (ECB) voted to keep eurozone interest rates unchanged this month at a record low of 1% and warned that now was not the time to withdraw support as economies slowly emerge from recession
GDP Fall Eases and Points to Recovery
UK GDP fell by 0.7% in Q2 2009, 0.1% less than initial figures from the Office for National Statistics (ONS) suggested. Annual GDP remains down 5.5% on June last year, but the economy is thought to have passed the worst when GDP fell sharply by 2.4% in Q1 2009. The easing rate of fall in output has prompted hopes that the UK will join other major world economies emerging from recession. The optimism was reflected in the Institute of Chartered Accountants in England and Wales's Business Confidence Monitor. Respondents expect GDP to grow by 0.5% during the current quarter. Encouragingly, the BoE is forecasting a 0.4% rise in GDP for Q4 2009 and growth of 2.2% during 2010.
Services sector recovery gathers pace
The services sector grew at its fastest pace in almost two years in August, also indicating that the UK economy is on track to return to growth in the third quarter. The purchasing managers' index for business activity within services companies rose to 54.1 from 53.2 in July the highest level seen since September 2007.
Key Indicator Points to Positive Impact of Quantitative Easing
The BoE has also released figures that measure the supply of money, M4. In July this year, M4 grew by 1% in the month of July, up from a decline of 0.3% in June. Growth of M4 is widely accepted to be one of the first signs that quantitative easing may be boosting economic activity.
Ben Bernanke Reappointed Fed Head
Ben Bernanke
The Chairman of the Federal Reserve, Ben Bernanke, was reappointed earlier this month, ending speculation regarding the role. He is regarded as having taken aggressive action in the face of global economic crisis.
Secured Consumer Lending Falls by 85% in a Year
Figures from the Finance & Leasing Association reveal that consumer finance lending by its members dropped from £270m in June 2008 to just £42m in June 2009.
Lloyds Drops out of World's 50 Safest Banks Ranking
In the year following its takeover of HBOS, Lloyds Banking Group has lost its status as one of the world's safest banks after it fell from the top 50 ranking compiled annually by Global Finance magazine. The group was previously ranked in 6th place. Only two UK lenders, HSBC and Nationwide, remain in the top 50; in 18th and 46th place respectively.
Mortgage Profits Hit Record Highs
Data from Moneyfacts from the end of August report that lenders were seeing the highest margins on mortgage lending since 1988. At the end of the month swap rates stood at 2.04%, compared to an average rate of 5.18% for a two-year fixed rate mortgage, representing a 3.14% margin.
FSA Reveals Complaints to Banks Outstrip Advisors 50:1
Banks are facing more than 50 times as many complaints as financial advisers, according to figures released for the first time by the Financial Services Authority (FSA). In the second half of 2008, banks received 988,702 complaints, more than 53 times as many as were received by advisers, which totalled 18,633.
KPMG Predicts Further Mortgage Market Consolidation
As many as five UK building societies could be forced into mergers over the next two years, as a result of continuing losses and regulatory pressure, according to KPMG following annual analysis of its Building Societies Database.
Scale of Fraudulent Mortgage Applications Exposed
The Observer reported that the Chelsea Building society said criminal organisations with the support of professional advisers were behind fraudulent buy-to-let loans made between 2006 and 2008 on hundreds of properties in Manchester, Leeds and several other northern cities. Losses were estimated at £41m. Bradford & Bingley, the nationalised buy-to-let lender, also announced that it had set aside an extra £100m for potential losses from mortgage fraud.
Buy-to-Let Lending Gap Widening
According to research from moneysupermarket.com, the gap between supply and demand of buy-to-let mortgages continues to widen. Enquiries for buy-to-let mortgages have increased by around 50% since August 2008, whereas over the same period, available products have diminished by more than 70%. In addition, falls in interest rates for buy-to-let products since August 2008 have not kept pace with residential lending, having fallen by an average of just 1.13%, compared to 1.95% for mainstream mortgages.
Buy-to-Let Arrears and Defaults Ease
The Council of Mortgage Lenders (CML) has reported that the buy-to-let market is showing additional signs of stabilising. Figures for Q2 2009 show that buy-to-let mortgages in arrears of 3 months or more fell by 17% on the previous quarter. Policy Advisor, Rob Thomas commented, “We expect arrears to continue to fall as landlords are helped by low interest rates and although house price falls have limited the scope for some to remortgage, there is no evidence that landlords are exiting the market in large numbers.” The mortgage market as a whole saw arrears of 3 months or more increase by just over 2%, but repossessions fell by 10% during the same period.
Increase in Volume, But not Amount, of Mortgage Approvals
The number of mortgage loans approved in July jumped by 76.7% compared to July 2008, the largest annualised increase since February 2008. However, net lending increased by the smallest amount since October 2000; the value of lending rose by just £1.6bn as new lending was offset by repayments on existing mortgages.
Housebuilding Starts on the Rise
The construction of more than 30,000 new homes got under way in Q2 2009, 63% higher than the previous quarter, but still 9% lower than a year ago. In response, the Federation of Master Builders stressed that the number of new homes being built remains below 100,000 new homes per year, well short of the Government's own 240,000 target. The Home Builders Federation pointed out that a sustained increase of new homes would not be possible until there is a return to more sensible levels of mortgage lending.
Retired Couples Favour Town Over Country
Rural idyl not so ideal?
Developers are reporting that the ‘grey pound’ is taking advantage of the property market by snapping up City apartments and opting for an active social life in town rather than heading for life in the country.
London Property Selling at Fastest Rate in 12 Months
A shortage of homes for sale in London means that the average sale time of a property has dropped to 4.7 months, compared to 8.6 months a year ago. The shortage of stock offered for sale has also contributed to price rises as more purchasers compete for fewer properties. Agency, Hamptons International indicated a ratio of registered house hunters to property of 9:1. As property prices rise and more stock comes to market, the pace of increase could fall away unless new purchasers are able to access appropriate mortgage funding.
Rental Market Continues to Consolidate
The Association of Residential Letting Agents (ARLA) has said that the number of rental properties coming onto the market because they cannot be sold has begun to drop. 80% of members reported ‘reluctant landlords’ renting property compared to 95% in November 2008. ARLA Operations Manager, Ian Potter [a London Update guest writer] said that London and the South East in particular were showing signs of optimism. The positive sentiment was mirrored by Findaproperty.com's latest rental index results which showed the second consecutive month of a small increase in average rental. Available rental stock in August was 2.0% lower than in the previous month and has fallen by 3.7% since its peak in May 2009. Nationally, rental stock remains much higher than this time last year (up 48% on August 2008).
Comparing House Price Headline Statistics
Nationwide achieved sale prices up 1.6 per cent in August
Based on the society's loans and valuations across the UK, but is currently subject to only low transaction volumes.
Rightmove asking prices down 2.2 per cent in August
Based on asking prices of homes advertised on its website. Currently based on low volumes of stock offered for sale.
HBOS achieved sale prices up 1.1 per cent in July
Formerly the Halifax Price Index, based on the bank's mortgage loans and valuations. It traditionally has a Northern UK bias in its data with poorer representation in the South and South East regions.
Land Registry July prices up 1.7 per cent
Based on a sample of completed transactions, but even the most recent Land Registry data is subject to a two month lag.
DCLG up 2.6 per cent in three months to June
Based on mortgage lending with data collected from the Council of Mortgage Lender's (CML) Regulated Mortgage Survey. It excludes cash purchases.
Students Bed-Down at Hammersmith Palais
Proposed plans for the redevelopment of Hammersmith Palais
Developer London & Regional has submitted new plans to transform the former music venue and nightclub into a 10-storey tower with 450 student residences and 30,000 sq ft of leisure space.
Vauxhall Cross Tower Rethink Urged by Neighbouring Council
CGI of the proposed Vauxhall Cross tower
Wandsworth Borough Council has urged its neighbour, Lambeth, to seek additional funds for transport improvements from the developer of a proposed new 42-storey tower at the site. The scheme would provide 376 new apartments and 60,000 sq ft of restaurants, shops and offices. Fears are that the current tabled contribution of £790,000 towards transport improvements is too low given the pressure that the development will put on the local infrastructure.
Commonwealth Institute Plans to Placate English Heritage
Following criticism from English Heritage and the local council, plans for the redevelopment of Holland Park's Grade II listed former Commonwealth Institute have been overhauled. Three residential blocks on the site have been significantly reduced in height and proposals for the entrance have been altered to closer reflect the original iconic 1960's structure.
Boris Flexes His Muscle Over Tower Hamlets' Columbus Tower
CGI of Columbus Tower
Mayor of London, Boris Johnson, has taken the decision to reconsider plans for a major new development in Canary Wharf after Tower Hamlets refused planing permission last month on the grounds of the impact on neighbouring buildings. In reviewing the decision, the Mayor stated that the plans for the 63-storey Columbus Tower are of major significance to the whole of London and would provide a significant contribution to Crossrail.
Young London: One Year On, and What a Year!
Since the launch - 12 months ago - of our Young London estate agency office in SE1, press reports regarding the state of the rental market have focused upon an over supply of rental property resulting in falling rents. Whilst average rents have fallen across the UK, and in London have fallen by up to 10% during the last 12 months, it's particularly encouraging to be able to point out some good news...
The average rental from a Young London property is currently less than 5% below what it was 12 months ago. Impressive in its own right given the challenging market but even more so when combined with the fact that Young London has successfully let the majority of properties within 8 to 10 days of them becoming available and that our occupancy rate currently stands at higher than 99%.
The driver of this success on behalf of our landlords is our focus on customer service and embracing new online methods of attracting tenants, not only through our website, but also through social networking such as Facebook and twitter, along with our recently launched London LowDowN e-zine.
Now more than 90% of our lettings enquiries are generated directly as a result of online marketing to raise the profile of the Young London website. Incredibly, the traffic has grown by almost 15 times since this time last year and we currently generate 600% more quality website traffic than Google's benchmark for estate agency websites and have an enviable rate of conversion from enquiry to tenancy.
Young London now manages more than 300 properties throughout London and continues to grow and thrive by providing a professional service in a sector that traditionally has been poorly regarded by tenants and landlords alike.
Many thanks to all of our landlords, tenants and the Young London & Young Group teams for making the last 12 months such a success. Here's to the next 12 months and beyond!
Visit Young London online at: www.younglondon.co.uk.
Neil Young
CEO, Young Group
Young Finance News
Young Finance has submitted a number of mortgage applications in respect of The Landmark. Purchasers are urged to ensure that they make an application for mortgage finance. For more information, contact Young Finance on +44 (0)845 356 1000 and speak to Jane Reeves.
Young Index Q3 2009
At Young Group, we research the property market, the drivers of supply & demand that underpin London's residential property as a long term investment asset. Each quarter we gauge market sentiment by asking clients and contacts to share their opinions through Young Index. Many thanks to all those who responded with their thoughts. The results will be featured in the next issue of London Update.
Get the LowDowN on London...
As ever, this month's London LowDowN is jam packed with the best bits of London: discover the best way to order a take away in your postcode, the most sumptuous organic beauty products, some of London's most fascinating facts and world firsts - and if you're feeling energetic, get in the Olympic spirit and learn a new sport at some of the capital's most interesting sports clubs.
Find the LowDowN online at: www.younglondon.co.uk/lowdown
Don't be shy; join the growing LowDowN community and share your favourites; email lowdown@younglondon.co.uk or tweet @younglondon. Any recommendations featured go into the hat to win a copy of The London Companion, the indispensable guide to London's quirky, unusual, thought provoking and sometimes downright disturbing history.
Young London Seeks Quality Rental Property
Following an extremely busy period, Young London has successfully let more than 110 properties in the past 5 months alone. The occupancy rate for property let through Young London is currently higher than 99% and were now running short of quality London property to offer to corporate and professional tenants.
If you have a property that you would like to rent out quickly, for a good rental income and with a minimum of fuss, take a look at the Young London website, or call one of the Young London team on +44 (0)20 7593 3300 to find out more about our services and the current rental market in London.
THE SUNDAY TIMES
Estate Agency of the Year Awards, 2009
Young London is proud to be considered for another national award. The team has been put forward as a contender for the Best Small Lettings Agency Award at this year's Sunday Times Estate Agency of the Year Awards. The category finalists are selected at the end of October and winners announced at a ceremony to take place in November. Watch this space...
Young Group specialises in delivering Property Portfolio Management services to private and institutional investors. The Groups activity spans the entire investment cycle from identifying opportunities and financing their acquisition, through to managing the asset (furnishing through Young Furnishing; tenanting through Young London; financing/refinancing through Young Finance), regularly reviewing the performance of the property holdings and advising on strategic direction, through to realising returns in the most tax efficient manner. Young Group supports NORWOOD and CHILDREN with LEUKAEMIA, charities doing valuable work which is particularly close to our hearts.
Visit us online at www.younggroup.co.uk, www.younglondon.co.uk, www.youngfinance.co.uk or www.youngfurnishing.co.uk to learn more.
t: +44 (0)845 356 1000 e: info@younggroup.co.uk
