UK property is still top for Chinese buyers, with a few differences
UK property is still top for Chinese buyers, with a few differences
China’s HNWI continue to snap up London real estate at the lowest prices in a decade
With a population of 1.4 billion, China presents a huge opportunity for UK property investment. If we were to target just one per cent of China’s population, that is 14 million people; almost twice that of London’s population. So I am sure it comes as no surprise when I say that Asia is a key target for the UK property market.
High net worth individuals (HNWIs) across Asia have been snapping up property in the UK, London particularly, for many years now. Usually, homes are bought off-plan at a property fair and then rented, held as investments or used as second homes.
When the UK voted to leave the EU, this brought immediate uncertainty surrounding the UK as a safe haven for investment and many investors held off to see what happened to the market. However, once the value of the sterling plunged, this presented a huge opportunity for wealthy Asian buyers and the enquiries came flooding in.
Often, those from China who buy property overseas have one of four main motivations: the first is investment; using London as a secure place to store money, to guard against the devaluation of the Chinese yuan. The second is lifestyle or prestige, which means simply owning property in London as a symbol of wealth and achievement. Other buyers might purchase a property as a second home, or perhaps most frequently, for education purposes, in the hope that their child will study in the UK.
In terms of location, we are noting a shift towards the fringes of London which will soon benefit from Crossrail, a £14.8bn, 73-mile metrolink running from west to east across the capital, which is set to complete in 2019. 20 or 30 years ago, most Chinese investors would have been setting their sights on central London. But improved transport links are now drawing foreign investors to places such as Peckham, Slough and West Drayton.
More: Asian HNWI still love a slice of London luxury
Despite the Brexit announcement being made in June last year, the truth is that we are still over two years away from seeing any significant changes or concrete plans put in place. As such, new build property in the UK remains in high demand, particularly as the British Pound is becoming cheaper for Hong Kong Dollar investors.
It is true that London property prices are increasing, yet Chinese buyers are still successfully managing to secure a bargain. This is best explained by comparing property prices in London at the end of 2007 with January 2017. In November 2007, the average price of a property according to Land Registry figures was approximately GBP297,000, with an exchange rate of over 16 Hong Kong Dollars to the pound. Therefore, the average home would have cost around HKD4.9million. Now, in 2017, the average property price has risen to GBP475,000, representing an increase of 60 percent. However, due to the exchange rate now standing at roughly HKD9.4 to the pound, the same home would cost just HKD4.5m.
Consequently, despite increasing property prices, London property is actually eight per cent cheaper in Hong Kong Dollars than it was in 2007, meaning the current surge in investment is more than likely to continue throughout 2017 and beyond as Chinese buyers snap up London property at the lowest price in a decade.
The UK property market remains resilient despite the largely unforeseen circumstances brought about by Brexit and is still viewed very positively as a safe haven for foreign investment. For as long as China’s wealthy individuals continue to seek opportunities to move their money outside of China, the UK will continue to benefit greatly, with 2017 anticipated to see a strong flow of investment from Asia.
Read next: Why Asian investors in London should focus on older residential stock
Source: Property Report