A Line On Property

Not Hong Kong property, (about which enough has been written), but property from elsewhere being sold in Hong Kong!

I often get surprised by the advertisements that appear in our local Hong Kong press, extolling the virtues of buying a desirable property in say Melbourne or London, although the latter is probably more prevalent. Actually, "uncomfortable" might be a better word than "surprised". Not because the advertisements say anything illegal or technically inaccurate, of course. Now that wouldn't be allowed, would it? No, I get uncomfortable because the London pad of your dreams, "only 25 minutes from London's Oxford Street shopping area by underground train" is often not quite what it seems.

Some of my Hong Kong friends have a reasonable working knowledge of London - or parts of it, and have property there. But this is property in the more fashionable areas of the city like Belgravia, Sloane Square, smart parts of Victoria, and Mayfair. Areas of a rather genteel London (well, everything is relative!), slap bang next door to Harrods, a genuinely short distance to the fashionable shops on Bond Street or Regent Street, and Theatreland. Good restaurants and Clubs.

But these are not quite the geographical locations of the advertising in question.

For example, there have been some recent opportunities to buy properties in the "newly fashionable" areas of Islington and Edgware. And the advertisements are always accompanied by a little diagrammatic showing you just how "easy" it is to hit the centre of London in a short period of time by train - from the moment the train starts its journey.  But let me tell you that if you are stuck at the top end of the Northern Line on the London Underground, which is where these little satellite towns/villages are located, and if you think you are going to have an easy ride on the tube every day to get to the famous London shops and sights, think hard before you buy.

The Northern Line is arguably the worst of the London Underground's lines. It was started in about 1890, it is deep, claustrophobic, carries over 200 million passengers a year - and is starting renovations that will see the line closed at weekends for about two years, and a reduced service in the evenings, just as you wanted to come home from dinner. It probably has the poorest record for delays of any line in London.

But that information is not included in the sales pitch. Of course, why would you? 

Then just recently there have been the advertisements for property in Croydon, the self-styled "third city" of London. (Not sure who gave it that name - maybe the same people who came up with "Hong Kong - Asia's World City"?). But Croydon less than three years ago was the subject of a London evening newspaper report that said, "Poor Croydon badly needs a facelift. Computer models of how the badly lined south London capital might look in five years' time were presented in a wishful brochure last week. Examination of the treatment plan reveals both naïve optimism and a refusal to face uncomfortable truths". Recent investigation suggests little has changed so far.

And like so many other cities around the world, it has its seamier side. Indeed, one of its (in)famous daughters said of it only last month "It's so rough. My Dad was in the pub the other day and somebody got shot". The speaker? Kate Moss - she of supermodel fame. The subsequent commentary on her remarks from local inhabitants was, perhaps surprisingly, actually largely supportive of her words, although one wit reportedly said - "Don't knock Croydon Kate, if we didn't have the criminals where would you get your drugs from?" Naughty - but kind of funny.

The purpose of these observations is not to disparage Islington, or Edgware or even Croydon. I am sure they are nice places to live in, and I am equally sure that the properties being sold are of a decent quality. But from the people in Hong Kong I have asked who have shown an interest in acquiring something in London, (and not the same types as those with the properties at the smart end of town), it is clear that they have no idea where they are buying. (It's a bit like the stocks they buy on the Hang Seng index - they buy by the stock number, not the underlying business of the company). London to them is like putting a circle around Central, Mid Levels and the Peak, whereas what is on offer is like living at the Lo Wu border or Yuen Long. It is not what they expect.

The moral of the story?

Even though the pictures look wonderful, the price is right, and the countryside appealing - is it actually where you expected to be? Is the station entrance for your 25 minute journey to town outside your front door, or do you have to walk 20 minutes to get there? Are the pictures you are being shown an artist's impression, missing out the warehouses in the street behind you, or are they genuine photographs of the neighbourhood? And if you can afford to spend £200,000 or more on a property, you should be able to spend a little more to go visit your potential purchase before you sign on the dotted line - even if the sales person offers you a further 10% discount if you sign then and there.

Comments

[Brenda]

Hi David,

I am a journalist from Reuters and chanced upon your blog post while researching on this very topic for an article I'm writing on the recent wave of Far East investment in London's new build property market.

The points you made were very interesting and I was wondering if you thought they still held true a year on, and if I could speak to you for more of your thoughts on this.

My email is [email protected]. Please let me know if you have any questions and I look forward to hearing from you.

Many thanks,
Brenda

[Esther Chung]

Insightful comments!

[David Eldon]

An interesting and well reasoned review. It will be fascinating to see what happens when interest rates eventually rise in Hong Kong. (I note that the properties bought during the Financial Crisis in America are now coming back onto the market as even those borrowers are finding repayments difficult).
Thank you for your comments.

[Zarathustra W.]

You are very right. I have lived in London for a year (used to live in the really central London close to Covent Garden), so even if I don't know the exact locations on those advertisements, at least I know how to locate them, and most of the time those locations are just not as good as they claim.

A bit off-topic, I have written recently written on HK property:
http://www.alsosprachanalyst.com/real-estate/hong-kong-property-my-prediction-for-2011.html

[Robert]

Extremely wise words! Having spent more than a decade commuting on the dirty,unpleasant & undependable Northern Line,(in part from Islington), I wouldn't recommend it to my worst enemy! To be fair there have been improvements, but the militant,& apparently untameable unions make up for that!
Forgetting the Awfulness of Croydon,anyone buying there for access to London, really does need their head examining! All the above comments on the Northern Line, also apply to British Rail,(the transport into central London from Croydon).
Unwise to buy in 'Rip off UK' without 'eyeballing the goods Guv'.'!