Around £10.8bn of British property is now owned by Hong Kong residents, and investors from the region are increasingly turning to the UK buy-to-let sector.
According to the latest statistics from Hamptons International, the number of Hong Kong nationals who own property in the UK rental market has doubled over the past three years, as investors have capitalised on the country’s strong housing sector and soaring rental demand.
Now, around 10% of all UK property landlords are thought to be Hong Kong residents or expats, up from 5% in 2020. Meanwhile, figures from Skipton International have revealed that almost a quarter of its international buy-to-let mortgages are held by Hong Kong nationals.
This surge in interest in the UK buy-to-let market has been influenced by a range of factors, including an increase in the number of Hong Kong nationals with British National (Overseas) (BN(O)) visas moving to the UK, with the option to apply to stay in the country permanently after five years.
At the same time, Hong Kong’s housing market has struggled with sky-high prices for a number of years, followed by a significant market slowdown as the government has tried to make property more affordable. This has led many investors to be cautious of a potential housing market crash in the region.
Hong Kong buyers are keen on UK cities
Skipton International, which provides mortgages on buy-to-let property for expats and overseas residents, has noticed a sharp rise in the number of enquiries from Hong Kong buyers in the aftermath of the Covid pandemic. At the same time, mortgages from other foreign nationals have either declined or stayed the same.
City centre property in particular is proving popular with overseas buyers at the moment, says Lorraine McLean, head of Skipton’s buy-to-let mortgage team, especially new-build flats that are ideal for renting out to local professional workers.
“London, Manchester, Liverpool, and Birmingham are popular cities, in part because they are home to some of the country’s best universities.
“A lot of people in Hong Kong have felt unsettled and the restrictions in China have made them feel like they need to get out. Many used Covid to build up their deposits.”
The restrictions McLean is referring to are those imposed in mainland China which limit individuals from spending more than $50,000 (around £39,000) per year on foreign currency purchases. Many worry that similar rules could make their way to Hong Kong, so are taking action to invest overseas now.
Cheaper and stronger
The UK property market is not only considerably more affordable than Hong Kong housing – particularly for those looking to invest in the UK’s key regional cities such as Manchester and Birmingham – but many also perceive it to be a more resilient sector for investment.
Overseas investors in the UK must pay a 2% stamp duty surcharge on their purchase, on top of the standard stamp duty rates, which some believed could put foreign buyers off the market. However, as Skipton points out, this “pales in comparison” to Hong Kong’s 15% surcharge on second homes.
A further draw to any overseas investor from a country whose currency is pegged to the US dollar is that the pound has grown weaker in recent years. This has essentially made investing in property in the UK cheaper for many buyers, creating a sense of achieving a discount compared to when the pound was stronger.
Coming back to the idea of investing in UK cities in particular, Sam Lee, director at Capricorn Financial, points out that university cities are of special interest to many Hong Kong investors. Properties can be used as accommodation for investors’ children or family members, and also hold future yield potential.
“It can result in a good long-term investment, both in terms of rental yield and capital appreciation,” he said.
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