With property prices softening as sterling falls, the UK property market is witnessing a significant uplift in Chinese investment, particularly in London.
Chinese investors have been active over the last few years, but are becoming far more prominent. As such, do they represent the next wave of international buyers or something more sustained and far reaching.
There are many factors behind Chinese investment in UK property – some of which include:
- A growing affluence of the Chinese middle and upper classes in a huge population of nearly 1.4 Billion
- The slowdown of the Chinese economy to growth rates of 6 to 7%, from previous levels of 9 to 10% and fear of continued Yuan devaluation
- A haven for assets in Anglo-Saxon countries with established property rights and a strong rule of law
- Investment schemes for acquiring passports; and flats for children when they are studying abroad
Reasons why there has been a sharp rise in Chinese investor interest in the UK
Two factors seem to be the main drivers for the UK (2016);
- Brexit and the resulting devaluation of Sterling
- The UK government’s decision to ease visa travel to the UK for Chinese tourists
According to the Home Office – The standard Chinese tourist visa is now valid for 2 years. Chinese tourists contributed £500M to the UK economy in 2015 and their numbers have nearly tripled since 2009. I have often found that many use their stay in the UK to search for property. Given the huge Chinese population – and all of the above factors – It would therefore seem that the potential for Chinese investment into UK property is substantial and likely to be sustained, certainly whilst economic factors remain in their favour.
Garrington’s experience with Chinese property investors
Over recent years Garrington’s experience with Chinese property investors has shown them to prefer modern apartment blocks – Preferably with concierge, gym and other in-house amenities.
Chinese investors are likely to focus on 1 to 2 bedroom flats that have good rental pedigree and which their children may be able to use when studying in the UK. They are willing to explore areas beyond the centre of London – as long as they are close to transport links.
In comparison to other international investors, Chinese investors seem to be less emotional about specific areas and are therefore more open minded about where to invest. They have a focus on value and yield, which can include many areas in Zones 2-6. As a result, we expect the presence of Chinese investors to be felt in most parts of London, especially in the sub £1m market.
In my opinion, this feels less like a temporary wave and more like a sustained surge in demand, which will affect the UK property market for at least a generation to come.