London and beyond: Chinese investment in British properties

November 28, 2015 08:01
Property being developed by Dalian Wanda in One Nine Elms along the Thames.  Photo: Jennifer Wong

Partly prompted by the uncertainties in the Chinese stock market, a substantial proportion of Chinese investors has turned to property investment abroad, with London being one of the most sought-after cities.

In the first half of this year, Chinese homebuyers accounted for up to 9.4 percent of sales in London's prime residential areas, real estate consultancy Knight Frank says.

Although recent figures from Britain's Office for National Statistics show slowing growth in the housing market, prices in London continue to increase, the capital enjoying a 7.2 percent year-on-year increase in house prices.

Upmarket estate agents such as Harrods Estates, the property arm of the world-famous Harrods department store, have indicated steady, rising interest from Asia in investing in Britain's residential property market, with Chinese billionaires looking to spend anything from £5 million (US$7.55 million) to £50 million.

"One of the primary motivators for Chinese property investment in London will be education, as increasing numbers of Chinese parents are choosing British education for their children," said Shirley Humphrey, director at Harrods Estates.

To some extent, this is unsurprising, considering that mainland China is now the top non-European country sending students to Britain.

Chinese students in tertiary education in Britain number 87,900, Higher Education Statistics Agency figures show (excluding Hong Kong, which accounts for a further 14,700 students).

"Newly built properties will continue to be their popular choices for investment," Humphrey said.

"However, we have also seen an increased interest in period homes with brand new, refurbished interiors."

Anticipating the rising demand, British property agents and developers have increased targeted marketing activities for Asian investors.

In Beijing, Harrods and Harrods Estates sponsored Hurun’s "Eton Night" event at a private dinner for 80 high-profile guests in the ballroom at Shangri-La's World Summit Wing.

Many estate agents have recruited Mandarin-speaking staff to cater to homebuyers from the East Asia.

In and around London, a variety of high-end properties and mansions priced at over £1 million are being targeted at overseas investors, ranging from new-builds in East London and luxury apartments such as The Heron near the Barbican to houses in countryside Coombe in Kingston upon Thames with excellent school networks.

On the supply side, the British property market has also proved attractive to Chinese developers.

"Mainland China has emerged as probably the strongest market for UK property, with the focus of demand on London projects. This trend has been capitalized on by Chinese developers, such as Greenland Group and Dalian Wanda, who have chosen to build landmark schemes in the city," Mike Bickerton, director of Cushman & Wakefield, said.

Shanghai-based Greenland Group is planning to build a 67-story residential megatower in London Docklands, set to become the tallest residential building in Western Europe.

China's leading commercial developer, Dalian Wanda Group Co. Ltd., has started works for One Nine Elms, a high-rise residential project in south London near Vauxhall as part of the larger regeneration project there.

Not everyone is convinced that the investment interest from Asia is being well channeled.

Edward Heaton from Heaton and Partners cautioned Asian investors against investing in prime central London property market off plan.

At present, in anticipation of the city's growing population of high-net-worth individuals, 54,000 new homes priced at £1 million or more have either been planned or are under construction.

Given the difficulty overseas buyers face in understanding the market and postcode demographics in London, Heaton felt that some may be misled into investing in peripheral but expensively priced locations.

"If the UK residential market were to remain at the top, it is important for people to be informed of the exact details where they are buying," Heaton said.

While London remains the obvious target for many Chinese property investors, some are also beginning to capitalize on the affordability and attractiveness of other British cities, Manchester being one of them.

Andy Phillips, commercial director of Manchester-based property agency Knight Knox, said Asian property investors might benefit from higher investment yield by looking outside London, since the capital is fast becoming expensive as an investment location.

"In Manchester, for example, property investors might be looking at 6 percent net rental yield as compared with around 2-3 percent in London," Phillips said.

"Where one can buy only a one-bed studio in London, in Manchester you can buy a two- to three-bedroom apartment."

While Manchester is two hours from London by train, it does benefit from a vibrant Chinese community (boasting its own Chinatown and arts centre) and an airport with direct flights to Hong Kong and mainland China.

It remains to be seen whether property investment in Britain is profitable given its higher property prices.

However, with the recent announcement of closer trade links between Britain and China after President Xi Jinping's state visit to Britain, and with the increased business activities in the country coming from China, the trend of property investment seems likely to continue.

-- Contact us at [email protected] 


The Heron is one of the recently built luxury apartment projects in the heart of London. Photo: Jennifer Wong

EJ Insight contributor