Hong Kong and Chinese investors continue to see the UK property market as one of the top investment options. Here’s why interest from Asian buyers has increased even further in recent months.
The UK is a long-established favourite for property investors from all over the world. Its strong economy, leading business environment and competitive tax and legal systems are all major attractions for many buyers. The UK’s proximity to Europe also makes it an ideal place for investors from outside the EU.
In recent months, there has been an increase in interest from buyers from Hong Kong and China in particular. London still attracts the highest levels of investment, but this is closely followed by other major cities across the UK. Manchester, Birmingham and Liverpool in particular are quickly becoming a top choice. Below are some of the reasons why Hong Kong and Chinese property investors are favouring the UK market now more than ever.
The current global situation
While many investors are continuing to push ahead with their investment plans, some have baulked slightly at the coronavirus situation. Anything that creates a level of uncertainty tends to lead to more bearish buyers taking a step back.
However, the outbreak peaked much earlier in China and Hong Kong than it did in the UK. So on an economic level, many investors over there are arguably ready to progress earlier than buyers in the UK or Europe. Simon Barry, head of new developments at Harrods Estates, believes there’s another reason too.
He says that “Asian investors have continued to be active in terms of enquiries, offers and interest”. For the firm, these buyers make up the single largest group of investors over the past three months.
“Anecdotally, Asian clients have told us that their cultures are more adapted to outbreaks of flu-related diseases and familiar with the precautions needed to halt their spread,” Barry says.
“We were surprised when Asian clients were warning us at the beginning of March of the severity of Covid-19. But equally they seem to be more optimistic about the ability of our economies to recover.”
An international safe haven
There has been a high level of political stress in Hong Kong since summer 2019. This was sparked when the government proposed a controversial extradition bill, causing major protests. After months of demonstrations, many of which led to violence, Hong Kong withdrew the bill in December.
However, many protests are still ongoing, creating a sentiment of instability for some investors in the country. By contrast, even in spite of the Brexit standoff which dominated the political landscape since the 2016 EU referendum, the UK is still seen as a safe market to invest in.
Caspar Harvard-Walls, partner at Black Brick, believes the protests have certainly had an impact over the past year.
“As the political situation in Hong Kong worsened towards the end of 2019, we saw a significant amount of new clients from that region looking to purchase property in the UK, to ensure that they had a plan if the instability continued,” Harvard-Walls continues.
“Whilst Covid-19 has naturally taken pre-eminence in everyone’s minds over the last few months, it does not mean that the situation in Hong Kong is any better than it was six months ago.”
Favourable currency exchange rates
The pound continues to run historically low against the dollar, and this is a huge draw for investors. The Hong Kong dollar, by contrast, has been performing strongly, meaning the UK offers much better value for money.
In the UK, interest rates are also currently extremely low. For borrowers looking to invest using a UK mortgage, rates are more competitive than ever. There is also a good range of products available to overseas borrowers from specialist banks.
While exchange rates make the UK property market more affordable, tax changes are also playing a part. At the end of 2019, the UK government announced a 2% stamp duty surcharge for foreign buyers. The change will take effect from 2021, meaning many investors are keen to complete deals before then.
Cheaper house prices
Hong Kong’s property market is one of the most expensive in the world. The government has taken certain measures over the years to try and ease the situation. However, they continue to sit at a level that makes them unattractive to many investors.
While London is also an extremely hot market in terms of pricing, it is generally cheaper than Hong Kong. Prices in the capital have risen a lot over the years, and as a leading global financial centre, London is still the go-to location for many. There are a number of top universities there, as well as a strong jobs market and high rental demand.
However, for investors looking for more diversification, other parts of the UK have risen in popularity. A growing number of Hong Kong and Chinese investors now look at the north and Midlands. These markets are currently performing much more strongly than London. House prices are also much lower, which can attract investors who want to make the highest monthly yields.
Domenica Di Lieto, chief executive of Chinese marketing consultancy Emerging Communications, says: “Buying criteria is most frequently met in northern cities, particularly Manchester and Liverpool, which after London are the second and third most popular cities for Chinese buyers.”
“Though this profile of buyer may reside at the lower end of the market, they often own several properties, and are frequently opportunists that will extend portfolios at short notice if they see the right opportunity.”
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