Post-Brexit UK-China property investment outlook – …

Despite the worldwide pandemic, current figures reveal that Chinese investment in luxurious prime central London residential property has soared, accounting for 15% of worldwide purchaser house gross sales above £1 million and 20% of offers above £10 million.

Meanwhile, in 2019, knowledge from the Office for National Statistics highlighted that Hong Kong and mainland Chinese patrons invested £7.69 billion in London property, together with over £750 million invested in residential properties within the City of Westminster and the Royal Borough of Kensington and Chelsea.

According to the Hurun Chinese Luxury Consumer Survey 2020, Chinese HNWIs are at present placing 12.5% of their wealth into abroad belongings, with London ranked as the most well-liked investment vacation spot.

However, with the UK having now formally left the EU, will this pattern change? Do Chinese HNWIs and buyers nonetheless regard the UK property market as a protected haven? What are the important thing components that drive their buying selections and the place are they keen on shopping for or creating within the subsequent 12 months?  

Well-known China/UK PR company 11K Consulting and The Luxury Property Forum put collectively a Thought Leadership Article to search out out, through which 13 revered specialists in Hong Kong, China and the UK, who’re both property buyers themselves or advise Chinese shoppers on their property investment methods within the UK, had been requested to supply their distinctive first-hand observations and insights into these subjects.

Here, we take a better take a look at what was found.

For Chinese property patrons, what are the distinctive promoting factors and issues of the UK property market after Brexit?

Phil Mason, worldwide gross sales director at Battersea Power Station, the £9 billion venture on the coronary heart of one in all central London (and Europe’s) largest regeneration areas, says that the UK property market is anticipated to stay a protected and secure market regardless of Brexit, and a key driver for Chinese and world patrons.

He argues London’s place as a world monetary powerhouse, a world go-to for training and a protected haven for Chinese buyers stays ‘as strong as ever’.

“There was slightly hesitancy within the rapid aftermath of the UK’s exit from the EU, with Chinese patrons naturally following a ‘wait-and-see strategy’ to see how the market would react. The issues had been rapidly put to relaxation,” Mason mentioned.

He added that the capital’s robust fundamentals, along with the extra normal attraction of the UK as a cultural melting pot and of London as an excellent metropolis through which to stay, implies that worldwide curiosity in property in London stays robust. He additionally identified that the weak pound presents a well timed alternative for Chinese and different worldwide patrons to buy property within the UK proper now at higher charges.

Kerri Sibson, gross sales and advertising and marketing director at Knight Dragon, which is investing £8.4 billion into Greenwich Peninsula, a clean canvas twice the scale of Soho, mentioned that the UK has lengthy been seen as a secure and protected market – a key driver for world patrons – and this hasn’t modified.

“Our training system is held in excessive regard around the globe, and is a significant deciding issue amongst Chinese patrons who’ve kids learning in London or planning to take action,” Sibson insisted. “Many wish to spend money on a base while their kids are learning, however one which can even be a wise long-term investment too.”

Dr. Ian Zhu, head of China outbound investment at Grant Thornton UK LLP, believes the UK stays a prime hotspot for Chinese property patrons despite Brexit due to its ‘excessive rental yield in contrast with the big cities in China, in addition to comparatively excessive liquidity as a result of the truth that London has been voted because the main metropolis on the planet to take pleasure in way of life’.

“The pandemic is a much bigger concern than Brexit, as a result of there may be decrease demand of pupil lodging since a lot of college students are doing on-line distance studying at house counties,” Dr Zhu commented.

Jo Eccles, managing director at ECCORD London, agreed and mentioned that there’s at present a whole lot of noise about Brexit and Covid-19, which is making Chinese patrons cautious in regards to the timing of their buy.

“There is powerful urge for food, however some patrons are holding off in the intervening time whereas they observe the scenario,” she mentioned.   

But she insists that the UK stays very engaging to Chinese patrons within the long-term as proudly owning a main London property may be very interesting as a wealth standing image.

“Over the years, we have now acquired some spectacular properties for Chinese shoppers who’re very area-conscious, desirous to personal properties in essentially the most fascinating addresses,” Eccles added.

“They are much less targeted on the inner property itself, and extra on the situation and constructing. In many instances, they don’t use the property. For instance, we handle a big home in Regent’s Park for a China-based shopper who solely considered it as soon as and has by no means visited the property since.”

Rafael Steinmetz Leffa, government director at GWM London Limited, another investment fund supervisor, claimed his Chinese shoppers nonetheless see a UK property investment as diversification away from their house nation.

“Interestingly, London property nonetheless stays a gold normal of investment and lots of nonetheless view a property in London as a trophy asset. It stays as a legacy for future generations, particularly when taking into consideration the protection of the investment from a ‘rule of regulation’ perspective,” he said.

Kingston Lai, founder and chief government of the Hong Kong-based Asia Bankers Club, argued that Chinese and Hong Kong buyers care extra in regards to the future and success of the UK within the long-term.

“In the brief time period, the UK is inevitably going to see a slowdown within the economic system, with Brexit and particularly with the Covid pandemic,” he mentioned. “But within the medium time period, I imagine buyers will develop into bullish once more. Brexit is and generally is a good factor.”

He added: “The UK will doubtless endure within the short-term, however after 3-5 years, it may be factor if the UK can restructure the nation in a great way. Also, property may be very distinctive. It isn’t very correlated to Brexit. The London actual property market may be very mature, and the demand all the time stays.”

Jacob Sullivan, gross sales & advertising and marketing director at Regal London, one in all London’s main residential-led mixed-used builders, believes that the just lately beneficial alternate charge and agency course of journey seen for the reason that UK’s full withdrawal from the EU have added additional readability to what’s already a transparent and clear course of.

Kees van der Sande, director and trustee at Formation Architects, an award-winning architectural observe in London, famous that post-Brexit, there may be now a way more degree taking part in subject for these wishing to come back to the UK from outdoors the EU.

“In phrases of London property, there are a selection of modifications occurring in the important thing boroughs of Westminster, Kensington and Chelsea and Camden which is able to restrict provide of some prime residential property within the long-term. As such, trophy freehold belongings which could be bought now will keep their long-term worth each as a rental or buy investment,” van der Sande defined.  

In phrases of particular places and cities within the UK, the place are Chinese patrons keen on shopping for or creating within the subsequent 12 months?

The analysis discovered that London is ready to stay the primary vacation spot of alternative, largely as a result of its unrivalled place because the UK’s financial, political and cultural centre, whereas regional cities similar to Liverpool, Manchester, Birmingham and Sheffield – all with long-standing Chinese communities – are additionally getting extra fashionable amongst Chinese patrons due to the potential increased yields they provide.

Phil Mason mentioned a number of the UK’s regional cities are gaining traction with Chinese patrons, particularly patrons keen on bulk offers at a cheaper price level. For the HNWI purchaser, although, he argues London stays out in entrance.

“In phrases of places inside the metropolis, Chinese patrons are inclined to favour large-scale developments that supply an all-in-one assortment of significant wants. The very best state of affairs, from our enquiries, is to be solely strolling distance to high-end stores and the most effective eating places, as this carefully resembles the properties again house,” he mentioned.

Kees van der Sande believes that Westminster, Kensington, Chelsea and Hampstead nonetheless supply the most effective property when it comes to trophy belongings.

“Edinburgh and Bath are additionally seeing vital development on the again of prime heritage places (and TV tie-ins) and restricted provide for these in search of an out of London asset or college metropolis,” van der Sande mentioned. “The nation home market can also be buoyant for these in search of extra isolation and even changing property to lease out to others like a high-value Airbnb.”

Changyi Liu, senior residential account supervisor at property company Foxtons, mentioned Chinese patrons are shopping for throughout the entire of the capital, with the most well-liked areas proper now being Central London, Canary Wharf, Nine Elms, Lewisham, Deptford and Woolwich.

“The property costs at these places have been rising prior to now few years till lockdown began, within the subsequent 12 months we are going to proceed seeing development charge decelerate. Chinese patrons will then begin in search of different places which have potential development, similar to Croydon, West Ham, Hounslow,” Liu mentioned.

Patrick Tsang, chairman at Tsangs Group, claims that Chinese HNWIs traditionally want to buy close to universities and are prone to be keen on new-builds. He provides that London will all the time be engaging to overseas patrons.

“Other main cities similar to Manchester, Birmingham, and Liverpool are constantly rising by inhabitants. Liverpool is likely one of the highest-performing buy-to-let hotspots within the UK – the postcodes L7 and L1 are usually reaching yields of 8.2% and eight%, with rises of 15% and 12% within the final 5 years.”

Kerri Sibson says that, historically, there have been solely a handful of central London postcodes that rich Chinese patrons would take into account.

“Now, an increasing number of are increasing their search and drawn to the advantages of recent and rising places, contemplating Zone 2 regeneration areas like Greenwich Peninsula, the place there may be potential for stronger yields,” she mentioned.

“These sorts of well-connected neighbourhoods, which have a mess of facilities on the doorstep, additionally ship in that the client can fortunately stay there, but in addition be reassured that ought to they ever want to transfer, there can be excessive demand from rental tenants, too.”

Jacob Sullivan emphasises that connectivity is essential for Chinese HNWIs. “London remains to be on the forefront of many Chinese patrons’ minds. The key world metropolis continues to draw world enterprise similar to Apple, Google and Facebook, and is investing hundreds of thousands in infrastructure in what’s already an especially well-connected metropolis, with developments similar to Crossrail, the biggest building venture in Europe,” he mentioned.

Charlie Willis, chief government at The London Broker, a collective of main unbiased property brokers, mentioned: “If you’re a Chinese investor seeking to develop, you should be fairly versatile the place you look, because the market stays very aggressive. You should be well-advised in what you might be shopping for and you should be fast.”

He added: “Besides London, Manchester in addition to Glasgow and Edinburgh, that are near good universities, are getting sizzling among the many Chinese patrons.”

Rafael Steinmetz Leffa commented: “I’d say that Central London remains to be the primary place that involves thoughts, however I’m more and more listening to of buyers cities which they understand as undervalued and anticipate to develop in the end. Leicester, Manchester, Birmingham and Sheffield are all cities with established and rising Chinese communities.”

Dr Zhu believes London is all the time the most secure place to speculate due to the liquidity in property gross sales and the rental market.

“Within London, I feel White City and Ealing may have stronger potential due to the brand new Elizabeth Line,” he mentioned. “There is growing curiosity in Manchester, Liverpool and Glasgow, the place the rental yield is increased and there are well-known universities to draw worldwide college students.”

He additionally factors to Cambridge, the place extra tech startups can be arrange, attracting younger professionals to relocate there. “But the pandemic is slowing every part down,” he added.

Steven Landes, managing director at Hawksford, echoed lots of the above ideas. “Regional cities similar to Liverpool, Manchester, Newcastle, and Sheffield are getting extra fashionable amongst Chinese patrons as a result of the yields are a lot increased in comparison with yields in London.”

In conclusion, the thought management article mentioned that – whereas Brexit and Covid-19 have inevitably precipitated some short-term disruptions on the UK’s economic system and property market – Chinese HNWIs and buyers stay ‘cautiously assured and optimistic’ in regards to the protected and long-term investment alternatives within the UK and London property market. 

You can learn the complete report right here. Our due to Sally Maier-Yip, founder and managing director of 11K Consulting, for offering us with it.