By Trevor Abrahmsohn, Managing Director, Glentree International
Prior to the 70s London and Paris were quaint souvenir cities steeped in heritage but hardly known as a Mecca for international commerce. New York was the place where international finance happened and if it didn’t happen there it didn’t happen anywhere else. Merchant banks such as Goldman Sachs had their headquarters in New York and experimental subsidiaries in London in order to explore the terrain at the time with the immerging European markets. In the last 40 odd years since the important structural changes, mainly brought in by Thatcher and her reforming government, London has been transformed to the colossus it is today.
More IPOS take place in London then in New York or anywhere else in the world. A merchant bank of any significance will now have its head office in London before New York which demonstrates the degree of changes and emphasis that London has on the banking and commercial scene.
There is no question that, in the US, New York is the centre for commerce, Washington the centre for politics, Los Angeles the centre for the film and television industry and Detroit for cars. An entrepreneur would need to be in the centre of the particular industry in order to further their progress. In contrast, the centres of excellence of many industries are all in London that is ‘the happening place’.
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For instance, a family could have their kids study in some of the finest universities in the world, whilst the parents could both have separate careers, all served by one capital.
Many years ago, people used to laugh at London’s cuisine but today it has the one of the most eclectic selections of restaurants and rivals New York. Culturally speaking the capital is rich in all forms of art, music and theatre. Invariably a play that ‘makes it’ in the West End becomes a world-beater. Our film industry has consistently beaten the US at the Oscar Awards and often a blockbuster movie is launched in London before anywhere else. Even the couture is ‘cocking a snoop’ at the French who had it their own way for so long.
In the Diplomatic Core London is the first or second most cherished place to live and many international monarchs, potentates, chiefs, sheiks, presidents and prime ministers have their second homes in London.
The property market has been the first place to receive monies from any part of the world where there is a sudden influx of wealth or political uprising i.e. the breaking down of the Cold War. The oil bonanza in the Middle East and Nigeria in the 70s. The fall of the Shah of Iran, the republican ousting of the Greek Monarchy and more recently the Arab Spring.
Over the years the British Empire has exported so much of its culture, customs and judiciary that even though the former colonial states are free to choose anywhere in the world to invest they still aspire to want a piece of English heritage in order to live the celluloid dream of the ‘English Squire’ by buying property in London.
As the stock markets ebb and flow the banking fraternity provide a good measure of the buyers for super prime property in London who invariably make this their permanent home.
Not only is purchasing property in London tax efficient with relatively low outgoings but the income yield on buy-to-let property has been, on average, 4% together with capital growth over time of about 7-8% which means a collective return of 11-12%. In international terms this is unique. In common with most other financial capitals of the world property prices do drop after recession by up to 25-30% in some cases but they recover within 18 months (sometimes earlier). Whilst other property markets in other capitals languish for years at a time.
Whilst Paris has remained this arthritic foreigner city, isolated from international commerce, London has embraced new technology and customs to the extent that it is at the cutting edge of many industries.
The capital is so well regarded that it could be an independent state since the rest of England is usually of not much interest to the international investor.
Whilst it may be one of the biggest cities in the world, interspersed within it are a plethora of green open semi rural spaces such as Hyde Park, Regents Park and Hampstead Heath that means that you can live in this glorious capital and not be far from the delights of the quasi countryside. By way of illustration a person could buy a property in Hampstead in up to 11 acres of land and be nestled between the medieval villages of Highgate and Hampstead with two golf courses and 900 acres of heath land on the doorstep.
The location is such that the centre of London is only 15 minutes away and a private/ commercial airport is with in half an hour and you will pay a fraction of the price that it would cost you in Hong Kong. In New York such an entity does not exist unless you are prepared to travel over an hour into the suburbs.
The political and economic environment has always encouraged international investors and as such the capital is a tax haven for entrepreneurs and long may it continue to be so.