Appetite among investors from Hong Kong remains high, but investors are urged to ensure they understand the new rules regarding the Register of Overseas Entities.
When purchasing property from abroad, including Hong Kong, it is common for investors to do so via overseas entities and corporations for tax and administrative purposes.
While this is perfectly legal and standard practice, in the past it has meant that the true, beneficial owners of the property are anonymous, hidden behind the corporate identity. This left the market open to potential money laundering and fraud, particularly as overseas entities owning UK property has multiplied in recent years.
In fact, data shows that since 2010, the number of UK homes owned by people and companies overseas has tripled, and now accounts for the ownership of more than 1% of all UK properties. While London is the main hot bed, foreign buyers are increasingly attracted to other parts of the country such as Manchester and Birmingham.
The new rules for overseas entities
As a result of this vast increase in the number of homes owned by overseas entities, and spurred on by the war in Ukraine accelerating the passing of the Economic Crime (Transparency and Enforcement) Act 2022, the new Register of Overseas Entities was brought into effect from August 2022.
Now, companies registered overseas that are investing in UK property must register with Companies House and identify the beneficial owners, to drastically reduce the risk of “dirty money” being allowed to flow into the UK via property ownership.
The new rules even apply retrospectively, meaning overseas entities that bought property in England or Wales after 1 January 1999, or in Scotland after 8 December 2014, must register. The final deadline for registering a property has just passed, on 31 January 2023, so anyone legally required to register who has not done so is in breech of the law.
According to the government’s website, there are three key parties involved in registration: the beneficial owner or owners, the corporate structure or entity, and the agent. The agent can be a financial institution, a lawyer, an accountant or even an estate agent.
All the information about how to register your UK property purchase as an overseas entity at Companies House is available on the UK government’s website.
Is it affecting Hong Kong investors?
The UK property market remains well-known for its ongoing strong performance despite external factors, and it is therefore continuing to attract a huge number of investors from overseas.
While the new register certainly means that there is now a very limited amount of confidentiality for those buyers who would prefer to purchase properties anonymously, for the vast majority of legitimate buyers, this is not enough to deter them from investing in the UK’s housing sector.
Estate agents Benham & Reeves are one company that has seen a significant uplift in buyers from Hong Kong and Chinese nationals recently. It notes a growing demand from these investors in certain areas of London in particular, with many enquiries about investing in property for Chinese and Hong Kong students.
Many parents, for example, invest in property for their children to live in for the duration of their studies, as the amount of money they can make from the property in the long-term is much more appealing than paying high monthly rents on accommodation.
Meanwhile, according to Sigrid Zialcita, managing director of research for the Asia-Pacific region at Cushman & Wakefield, the aim of the new Register of Overseas Entities is not a negative one and therefore buyers should not be put off.
