Chinese Investment in UK Property

19 April 2011, Top Club Magazine

Chinese individuals are growing in wealth and stature. With this rapid increase there is a growing need for them to diversify their wealth. Lower rents and property values in the UK has made London an increasingly interesting prospect.

Until recently Asian investors were still only a small presence in the market, around 5% of the £500k -£1m valued market. They are however growing. Liam Bailey, head of residential research with real estate agency Knight Frank, stated that Asian investors are now buying more than a fifth of all central London’s new properties, and account for 49 percent of all investment purchases in central London. Savills also notes that Chinese investors are some of the most active in the city

What has caused this?

The Asian luxury property market has seen its prices soar. Hong Kong has experienced a 45% increase in its prices since 2009 according to leading property firm Savills. Singapore has taken steps to prevent its property market overheating. It is likely mainland China and Hong Kong will take similar steps. These restrictions and heightened prices have forced Asian investors to look elsewhere to find property. London has become increasingly attractive. The city is seen as stable source of income, cheaper (property prices have fallen in the UK due to the economic crisis), and provide access to higher education for their children.

Camilla Dell is a Managing Partner at Black Brick. A property search and acquisition company in central London they look after high net worth, mainly international, clients who are looking to buy residential property in London. She states: ”The attraction to London is that many international buyers very much view London as a safe haven. At a time when many investors are still nervous about equities, property is the one thing they feel safe investing in’. This can be seen looking at recent buying trends, as seen above.

Chinese investors spent approximately £170 million ($260 million) buying up newly built properties in central London in the 12 month period ending March 2010. A weaker pound and tightened real estate policies in Asia have driven this trend. Britain offers the advantage of low restrictions on whether foreigners can own real estate, and a fairly fluid rental market, which is attractive to buyers seeking income from their properties. Buying residential property for investment is more attractive as, according to Knight Frank (another leading property firm), rents have risen 16% in 2010 and are due to rise further in 2011 – 8% according to Savills. Investment buyers can now expect between a 4 to 5% yield, coupled with real prospects for capital appreciation over the next 5 years. With interest rates at 0.5% in the UK, this is a compelling reason to buy residential property for many investors.

These figures and the increase in the number of new builds appearing on the market, which are generally very popular with Asian investors, are likely to make London more popular. Two such new projects are Telegraph Hill and Henry Moore Court. Both developments are located in prime areas, Hampstead and Chelsea respectively. Hampstead today is a colorful blend of the old and new. At its heart it retains the feel of a village community, but within easy reach of central London. Fashionable restaurants and bars, boutique shops and main high street names with the proximity to the Heath have established Hampstead as one of the loveliest places to live. Chelsea has long been a prime residential area within the Royal Borough of Kensington & Chelsea, appealing to many successful and international figures in business, the arts, music, and design who recognize its unique atmosphere, and choose it as their London residence.

The Telegraph Hill development offers an exceptional opportunity to buy a beautiful home in a unique location. The atmosphere is calm, relaxing and spacious with unique attention to detail. Telegraph Hill’s gated domain offers the privacy and security that discerning residents will consider essential. The Henry Moore Court is the planned development of an exclusive collection of two villa houses, 15 luxury apartments and 38 secure parking spaces, is currently underway and due for completion in Autumn 2012. The apartments, over four storeys, will be built to an exceptionally high specification offering the highest level of security and privacy to residents. The scheme includes a subterranean car park, private gymnasium and full concierge service. Charles Symons Jones from Alpark Ltd feels that Henry Moore Court “This exciting new build residential development is a rarity for Chelsea and one of the few schemes to be undertaken for ten years in this exclusive area of London; resulting in attracting interest from the discerning buyer.”

Some of the most expensive buys have been by high profile Chinese. This can be seen recently with Joseph Lau spending £33m on a mansion in Eaton Square. This is also the development where Roman Abramovich, one of the worlds richest men, has a property. Property firms are increasingly trying to target these high net worth individuals organizing events in China to educate investors on the London market. More are opening offices in Hong Kong and the mainland
(such as Hamptons) to expand their presence and sales. Some developers are even dropping the number 4 from new projects to cater to the Chinese market.

Bill Lindsay, a Barclays Director specializing in property, has stated that London will continue to be the best investment choice both for residential and commercial property. Outside of London he warns that the UK market is poor. Mr. Lindsay highlights the City and West End best locations for commercial investment, and areas such as Kensington, Chelsea, Hampstead, St John’s Wood for residential. Ms. Dell also highlights the importance of these areas ‘While you get less space for your money, the potential for capital appreciation is much higher. In addition, there is a wider tenant demand in more central locations, and therefore the investment is less likely to suffer from void periods’. Buyers also need to remember to tread carefully keeping in mind the desirable location and the right building when looking at UK property deals. Buyers often forget that estate agents in the UK are working for the sellers and are simply trying to sell a property for the highest possible price. They won’t tell you if the property will or won’t make a good return on investment and mistakes are often made, which is why impartial advice is fundamental when buying property, whether for investment or as a home.

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