After helping push gold prices to record highs three years ago, China’s return-hungry investors are doing a similar thing now to property markets around the globe. London has been a particular focus area for investment, sending real-estate values there on a sharp upward spiral and prompting worries among the locals that they could be driven out of their own market.
Unlike Chinese, Londoners are less keen on property speculation. They usually take time to search for the right home and tend to prefer buying units that are fully built and furnished.
But as Chinese homebuyers flock into the market, local residents are now turning anxious.
Christopher Murray, director of London property developer W1 Developments, told Yicai.com that Londoners have begun to fret that if they don’t own a house now, it may be impossible for them to buy one later.
People are now willing to buy properties that are still under construction, and some parents are even buying homes for their toddlers, something hard to imagine before.
For many Londoners, owning a house is a dream yet to come true. And the dream is becoming more difficult to realize due to the influx of Chinese money.
It is not only individual mainland Chinese that are interested in London properties. Chinese enterprises such as China Construction Bank, China Investment Corporation and property developer Wanda have also pumped billions of pounds into London’s property sector.
London has replaced New York to become the most suitable place for overseas buyers to invest in property, according to the latest report from the Association of Foreign Investors in Real Estate (AFIRE). The influx of capital from China and elsewhere has pushed the city’s home prices higher and higher.
As of the second quarter this year, housing price in London was up 12 percent on average compared to a year before, with the average price at 530,000 pounds (US$878,000), according to AFIRE.
Central banks in developed countries have adopted monetary easing policies since the financial tsunami in 2008, and global markets have been flooded with money — which is another crucial factor behind London’s home price surge. Housing prices in the British capital have doubled since the crisis.
First-time homebuyers in the city normally seek mortgage finance of 50 percent. That means borrowing around 250,000 pounds — based on the average home price — or 5 times their average annual income.
What makes the matter worse is that the average earnings for British have risen by less than the rate of inflation for the fifth year running in 2013, according to the UK’s Office for National Statistics, which means that their real income actually kept falling.
Murray warned that the influx of hot money is creating housing bubbles in the city. He advised investors to stay cautious.
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