As each month passes, we continue to hear that Asian interest in London is going to slow down, or at the very least there will be a serious challenger to the market.
The reason for this argument is largely due to the effect of ´northshoring´, the shift in investing from the South to the North due to lower costs and higher growth, with many Chinese and Hong Kong investors seemingly making this shift.
Chinese property enquiries in Manchester alone have risen by over 250% in the first half of 2018 according to Carrie Law, CEO of juwai.com, and this interest looks set to continue.
Compounding this, research from Savills has highlighted that UK investors have overtaken buyers from Asia investing in London´s West End property market over the first two quarters of the year. To many, this news would come as no surprise. However, it would be a mistake to generalise this information.
When asked whether Asian investment into London was finally diminishing, Chris Harvey, managing director of financial services for Asia-Pacific at Accenture says “In truth, there is no straightforward answer. It really comes down to the type of Asian investor you are focusing on; we have worked with many different types, who in turn have different challenges, sources of capital and investment criteria that you need to bear in mind when assessing appetite.”
There has been a fall in the level of investment from mainland Chinese investors in the capital. This appears to be a knock-on effect of the Chinese government’s capital controls on outbound investment. However, these controls have recently relaxed as of June 2018, with Chinese investors able to redeploy capital in the UK as long as the money being invested is from UK property holdings or non-Chinese bank holdings.
However, looking at the overall capital invested in London over Q2 of 2018, we see that London is still an attractive destination for Asian investors. When viewing the bigger picture, the findings from Savills show that for the first half of 2018, £3.39bn has already been invested from Asian investors, representing upwards of 70% of the total investment volume of £4.9bn, a significant percentage of this in hotel room investments.
In addition, following the Brexit vote in June 2016, there has been a significant increase in buyers based in Hong Kong which isn’t captured by the capital controls.
Hong Kong investors sought to take advantage of the weak pound for the comparatively attractive yields with confidence of the long-term health of the UK economy. It is worth noting that we have seen some well-established investors becoming wary due to the UK´s not-so certain economic health.
So, although established that London is seeing some more cautious investment from China and Hong Kong, this potential gap is quickly being filled by other Asian investors.
The steady stream of investment from Hong Kong has recently been exceeded by both Singaporean and Korean investors in the first half of this year. The range of purchasers is increasing, and if anything, Asian investors are looking for more stock to invest in within the capital.
It would appear then that London as a whole is showing no signs of slowing down. As cities such as Manchester and Liverpool continue to attract increased investment, so too is the UK capital.
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