Canadian government cashes in on London embassy

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Canadian government cashes in on London embassy

Canadian government cashes in on London embassy

The Canadian government has announced the sale of its London embassy for a staggering £306 million which is more than six times the asking price from 1999 when there were no bidders for the property. Despite the fact the UK government has increased stamp duty across the board it will only receive 4% for non-residential property although this does create a £12.2 million income for the authorities.

So why has the value of the Canadian Embassy in London increased so dramatically and who bought it?

Cost-cutting exercise by Canadian government

First of all we need to say that the sale of the London Embassy is part of a cost-cutting exercise by the Canadian government at a time when austerity measures are certainly evident across the board. The fact that the property failed to sell back in 1999 for a fairly paltry £50 million says everything about the state of the London property market today.

Quote from PropertyForum.com : “While there is no doubt that the Internet has opened up a whole host of opportunities for those looking to research new and potentially exciting property markets, the vast majority of investors still tend to go with the old adage “the trend is your friend”.”

The Canadian authorities undertook a sales process some time ago which attracted more than 20 bidders with an offer of £306 million from an Indian property magnate recently accepted. This may seem ultra-expensive for a property in London but when you bear in mind the address is “One Grosvenor Square” this may well give you an understanding of why there was so much interest in the sale.

Development of the Canadian Embassy in London

It is believed that the property will be developed into an array of luxury flats just a stones throw away from the hustle and bustle of high society in London. The value of these flats is estimated at around £1 billion which if correct would create a significant capital gain for the Lodha Group.

Confirmation of the £306 million sale comes at a time when the Bank of England is looking to pull the rug from underneath the array of cheap mortgage finance available to UK banks. While this will not have a major impact upon the luxury end of the London property market it will likely have an impact upon the overall UK property sector. Whether it will dampen speculation and investment in the short to medium term remains to be seen but it does give a signal that the UK authorities are concerned about rising property prices.

Is this investment too late in the cycle?

If this was anywhere but London you would be forgiven for thinking that it was too late to take advantage of the booming UK property sector. The fact remains that London is to all intents and purposes a micro market in itself which is attracting enormous interest from not only domestic but also international investors. This is an area of the world that continues to attract massive property investment and this is unlikely to change dramatically in the short to medium term.

This property itself is unique, is decorated to the highest standards and has one of the most sought-after addresses in London. While there may be some variation in the value of future apartments built on the grounds of the Canadian Embassy it is highly unlikely that the successful bidder will have any trouble banking a profit in the medium to long term.

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