Despite the pandemic or perhaps because of it, luxury real estate in the countryside – in posh European countries (where you can even get citizenship by investment) – is booming. The experts from India Sotheby's International Realty, auction house Sotheby's and a UK real estate advisory break it down, in terms of hottest real estate investments in the UK. We also learn about how online auctions are soaring, in a world where art is never out of fashion – the perfect accessory for your lifestyle.

Realty is the new luxury… but it wasn’t it always the case? In today’s Covid times, nothing is more precious than home. And a secondary home will always be an extension of our primary lifestyle, one that encompasses our personal and professional lives. Both domestically and internationally, to find the suitable asset that encompasses art, antiques, holiday homes, and weekend getaways, is not something that is up everyone alley, so to speak. That is why firms like India Sotheby’s International Realty recently invited key experts for a discussion on changing lifestyles in the new normal, one where buyers – and we are looking at an Indian point of view here – can enhance their lives during and post the pandemic by investing in high-value art and secondary homes in key destinations like the UK and other European countries, often with the purpose of getting the coveted ‘Citizenship by Investment’.

Launched in India in 2014, India Sotheby's International Realty encompassed 70 professionals from the world of private banking and luxury, who brought decades of experience to the table. By 2019, it had delivered sales of $114 billion. The largest real estate advisor worldwide, its goal is to find the best homes, with the most exacting standards of design, in well-connected destinations, with a focus on UK and other top European destinations. “During these times, we have learnt the importance of adjustment and innovation,” says Natalie Mik, Global Vice-President, Affiliate Services, EMEIA, Sotheby’s International Realty Affiliates LLC, who has seen the phenomenal growth of real estate purchases in USA, Canada, and South America, due to pent-up demand. “But now that some airports have opened up and buyers can actually travel to a destination, sit down at the notary’s and sign the property deed instead of doing it remotely, it’s been a huge relief.” She says that with her company’s strong history in markets like UK, France, Germany, Italy, and Portugal which are currently doing very well, there is also demand for smaller countries like Malta, Andorra, Montenegro, especially for Citizenship by Investment, with the chance of residency leading up to citizenship.

One of Central London’s best connected locations

London Calling

And with the airways now opening up, some like Nicholas Spencer, Business Development Manager, MEA and India, for British property developer the Berkeley Group, feel that as soon as Indians can jump on a plane to the UK the “floodgates will open”, so to speak. He says that the Berkeley Group, with its 45 years of experience and 60 developments in London and Greater London, is quite well positioned to get a good cross section of where the demand is falling. “People are focusing on lifestyle and affordability. They are moving away from Central London trophy assets, and leaning more towards open spaces, balconies, and from an investment point of view, greater yields, lower cap value, and more affordability,” says Nicholas. “There’s been a slight drop in interest in Central London stock, and higher pickup on outer London and tertiary stock just outside the M25 (the orbital motorway that surrounds Central London).”

Apartments on the river with views of Central London

Why would an Indian invest in a second home overseas, especially in the UK? “There are three reasons for this,” says Akash Puri, Director, International India Sotheby’s International Realty. “Imagine living in an apartment that overlooks the Thames River, or Buckingham Palace, Westminster Abbey, or the London Eye. It’s like looking at a painting when you look out of the window. We have completed two transactions in this building (overlooking the Thames River). London has been a preferred destination for Indians, because we are tied to London. It is the educational, cultural, and financial capital of the world. The first destination an HNI thinks of is London. Secondly, there is a demand and shortfall of 40 percent in London. Nowadays, investment in property overseas is not wishful thinking – it’s prudent fincancial advice for anyone wishing to diversity their wealth portfolio. Great rental yields that are higher than inflation rates, which is very different from what happens in India. Thirdly, the level of income is long term currency play, so if you look at the capital appreciation, the rental yields, and the currency play, you are looking at a double digit return on an annual basis.” The UK is number one in global real estate transparency index. The number of homes sold in seven days in recent months is up 125 percent as compared to last year. More than 200,000 homes have gone under offer between July 8 and August 31. And because of the stamp duty holiday, there’s been a saving of £15,000.

In terms of what kind of homes the buyer is looking for, Natalie Mik says there has been a change in buying behaviour. “Most of our clients don’t just own one property, but have a second, or an entire portfolio of properties,” she says. “There is a shift in demand for buying homes in the countryside, in low-density locations, wanting to escape the city centres.” She says that Sweden was never in lockdown, and had record sales in the first and second quarter. The same was seen in the UK, Ireland and France. “Also, a lot of people sitting at home want to upsize their primary residence,” says Natalie. “The third trend is significant sales of penthouses and large estates (priced at over Euros 5 million) – these are snapped up by cash-rich, opportunistic buyers looking for a deal, plus these beautiful homes are coming on to the market. So the demand for country homes, upsizing, moving to bigger homes, these are trends to stay.”

As Europeans are looking to migrate into the country, the trends in the UK are also leaning in that direction. Rightmove, an online UK property portal, recently reported an increase in 50 percent for 3-4 bedroom homes outside the M25. “People are moving away from city penthouses to more family-focused, garden-friendly homes,” says Nicholas Spencer. “They don’t want to be confined to a small square footage, but have more functional space. We have those opportunities in Zones 3, 4 and 5 (a ring-like system of zones starting from Zone 1, which is Central London) within the M25, and conveniently they are cheaper and yield a higher rate from an investment perspective.” He says that quality doesn’t go down, as you move out. The location just a bit outside of London has space as well as performance. And if people need to get into central London – with Work From Home, they may need to go in twice a week as opposed to five times a week. Moreover, Crossrail gets you into London in 20 minutes. It’s the typical trend of what were known as or used to be secondary homes, now becoming primary homes.

A brand new country to reside in

And technology provides the right tools, for what may be a life-altering decision, even a citizenship change. “You can do virtual tours – at Sotheby’s we have the technology to do it. It’s a fantastic tool,” says Natalie. It can be as simple as taking an iPhone movie and showing the home.” She feels that the European region is on the track to recovery, with airports in Sweden, Portugal, and Belgium open. Although it’s tricky with Fall coming, and Covid rates uncertain at that point. “The Citizenship by Investment program in those countries has seen a phenomenal uptick in Portugal, Greece, Mauritius, Cyprus, Spain, Andorra, and Latvia, which gives access to Schengen countries,” she says. “Even Americans want to buy houses in Switzerland to get access to the hospitals and medical treatments there. Every buyer has his or her own agenda.”

Akash Puri

The Citizenship by Investment program is an attraction for many HNIs. “We just had two clients who got citizenship for Portugal via investment,” says Akash Puri. “Out of 257 Golden Visas handed out in May this year, 19 went to Indians.” Portugal requires an investment of Euros 500,000 – one just needs to spend seven days a year there, and after five years, you get permanent residency with the option of citizenship. Malta also has a lot of attractions. Greece needs an investment of Euros 250,000, and after seven years one gets residency. For Cyprus, the investment in property is Euros 1.5 million. Plus there is a 1.5 % decrease in stamp duty until 2021 so it’s a good time to go for it.

Providing attractive rental yields in the commuter belt to London

A mansion in the ‘burbs

But if it’s the UK a buyer is looking at, for a second home, Nicholas says there is plenty to choose from as there are two types of buyers – the end-user and the investor. Properties in the UK hit both spots. “Green Park Village in Reading, is a case study for Indians,” he says of this property listed by the Berkeley Group.”An apartment here is for £280,000 (the yield is 4-5 %) while a 4-5 bedroom house will sell for circa £500,000.” He points out that in this rural area, there’re plenty of lakes and greenery, with schools, community centres, and open spaces. Plus it’s 45 minutes from Paddington Station in London, so you are getting the best of both worlds.

Then there is Wimbledon Hill Park, set in one of south-west London’s most affluent and desirable neighbourhoods just 25 minutes from Central London – the cost of a home there is £600,000- 2,000,000. “You have a private garden space, plus modern tech, with all the Work From Home necessities like wi-fi and breakout areas,” says Nicholas.

The jewel in the crown is Trent Park. “It’s accessible at £750,000,” says Nicholas. “For a five-bedroom place, the price is £2 million. It’s like this country manor divided into 14 luxury apartments, set on 380 acres of private land.”

But according to Nicholas, the Royal Arsenal Riverside apartments in south-east London are the quintessential blueprint for investing in London. Situated in the Zone 4, it is connected by the award-winning Crossrail train which will be launched in 2021. “This will take you to Canary Wharf in seven minutes, and Bond Street in 20 minutes,” says Nicholas. “Though in Zone 4 you will be able to connect to London as though you are in Zone 1. The price is £800 a square foot, and it’s like a five star hotel, with concierge service, gyms, restaurants, cafes. So when you walk out of your luxury apartment, you go straight into a luxury environment.”

And if it’s slightly lower price points that one is looking for, with all the space, then the ‘Home Counties’ in the UK like Surrey, Essex, Berkshire, Hampshire, Kent, and the Royal Boroughs, are all commutable to Central London.

Edward Gibbs

Collectors head online for art buys

And where luxury homes are prized as an investment, art can’t be far behind, especially for collectors. In terms of auctions for collectors – Sotheby’s has evolved to the circumstances currently with the pandemic, and innovated. “Live sales are the traditional format, with the theatrical event of the auction house,” says Edward Gibbs, Chairman, Head of Department, Middle East and India, Sotheby’s Auction (London). “We have successfully migrated to the online format, and it’s worked exceptionally well.” He gives the example of the recent record-breaking Rembrandt sale by Sotheby’s in late July this year, which had 165,000 people tuning in globally. “A digital format creates huge opportunities as compared to a traditional sale with 500 people in the room,” he says. “Our online sales have outperformed traditional sales and are livestreamed on our website, with people bidding online. The traditional format will not go away, but we are looking at 90 percent of all auctions to migrate online permanently, with new and younger buyers.” For example, at the recent Sotheby’s Watch and Jewellery online auction, a Tutti Frutti Art Deco bracelet by Cartier sold for $ 1.3 million., a record, and this was at the height of the lockdown!

And what have global art collectors been buying during the lockdown? “We continue to offer the same quality of art as before,” says Edward. “We never stopped. We have the biggest market share among the auction houses. In the absence of art fairs and galleries, there are fewer opportunities to buy art, so there is pent-up demand. And the outlet is online auctions.” Sotheby’s had $ 2.5 billion in sales in the first half of 2020 alone with 250 live and online sales. “Overall, sales are down, but the uptick is in the number of sales that are online,” he says. “There were 14,000 lots sold since lockdown, and almost 100 percent were online.” For example, a work by US artist Jean-Michel Basquiat sold for $15.2 million; the highest bid went to a Francis Bacon triptych for $84.6 million, and $30 million worth of contemporary art, a record, went in an online sale. He says that 88 percent of all bidders this year were online, with lots of younger and newer buyers (30 percent of all buyers are under 40 years of age; 40 percent are new to Sotheby’s.)

Sotheby’s auctions are global – run from London, New York, Dubai, Milan, Paris, Hong Kong and Geneva – and this applies to their online sales. In March 2020, in the New York Indian and South Asian Modern and Contemporary Art sale by Sotheby’s, 33 percent of works were bought online, and the majority were either Indian collectors, or collectors of Indian art.