Wealthy Hong Kong and mainland investors are snapping up properties in London, the most sought-after destination, due to attractive returns and low transaction costs while Japan is also emerging as an investment hotspot, according to real estate consultancy Jones Lang LaSalle.
“People in Hong Kong have a natural affinity with Britain. Some of them buy properties for investment, while others buy accommodation for children studying in Britain,” Wong Mei-han, Asia-Pacific director at Jones Lang, told EJ Insight in an interview.
“There are many reasons why investors find UK property so attractive, but one of the most important is tax,” said Wong, who got her start in the property sector in London.
The UK government has recently amended laws and made them even more liberal to draw in overseas investors. For example, investors are offered generous deductions in income tax and exemption from capital gains tax and corporation tax in most cases.
Most of Wong’s clients are targeting properties in the price range of 500,000 to 800,000 British pounds (US$798,000 to US$1.28 million) in downtown London or high-end properties worth over one million pounds in prime locations.
For those who are interested in homes with a price tag of over 2 million pounds, they would prefer to apply an ‘offshore structure’ or corporate purchase to avoid the inheritance tax and enjoy much lower income tax, she said.
On average, these properties could offer a steady return of 4 to 5 percent per year, an attractive level given the nearly zero interest for savings deposits in Hong Kong. In most cases, these investors will be able to obtain mortgage between 60 to 70 percent at an average interest rate of 2 to 4 percent.
Several investors are buying properties for their children who are studying in UK. According to Britain’s Higher Education Statistics Agency, the number of Hong Kong students at British universities rose 9 percent to 11,335 between 2011 and 2012.
Japan Olympic trigger
In the meantime, Japan has also become increasingly popular among Hong Kong investors after real-estate values in the country slumped in the last two decades.
“More investors are looking at Japan in recent months due to weakening yen,” Wong said, adding that “property investment is another route for them to diversify their assets into other currencies”.
The Japanese government’s resolve to keep the yen weak has also made real estate in the country more affordable compared to Hong Kong, where authorities have been struggling to contain surging housing prices in recent years. The yen has slumped 13 percent against the US dollar this year and 22 percent over the last twelve months.
“Tokyo properties make a good investment because they are relatively cheap. Investors are able to find properties in central area of the capital city priced in the range of 2 million to 10 million Hong Kong dollars (US$258,000 to US$1.29 million),” Wong said.
Hong Kong investments in Tokyo property so far this year total US$1.1 billion, according to data from commercial property information service provider Real Capital Analytics.
“2020 Olympic Games is also a trigger for the [Japanese] government to ramp up spending in infrastructure and stimulate growth, which is set to benefit the property market,” Wong said.
Japan’s property market has become increasingly attractive for foreign buyers after Prime Minister Shinzo Abe took office in December with a pledge to end the deflation that had depressed real estate.
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