Chinese investments to revive UK property markets
London remains an attractive market for Hong Kong investors, given that yields from office buildings are slimmer in Hong Kong than in the UK capital
Property markets in the United Kingdom are expected to regain their growth momentum partly due to the rising investments from Hong Kong and mainland China, according to IP Global, an end-to-end property investment service provider.
“The prime London market has been slowing for the last two years. The transaction level is low as very few people are buying and selling,” Jonathan Gordon, distribution director at IP Global, told Asia Times in an interview.
Some buyers are hesitating because of the high purchase prices and transaction costs, while some others have adopted a wait-and-see stance as the UK prepares to leave the European Union, he said.
However, he said such trends would only be temporary, as many long-term investors are still interested in buying properties in London, which is seen as a safe-haven market.
He said the July purchase by Lee Kum Kee, a Hong Kong-based food company, of London’s 20 Fenchurch Street skyscraper (nicknamed the “walkie-talkie tower”) for a record £1.3 billion (US$1.75 billion) showed that the city remains an attractive market for Hong Kong investors, given that yields from office buildings are slimmer in Hong Kong than in the UK capital.
The weak pound has also encouraged Hong Kong and Chinese investors to buy properties in the UK, he said. “If you can get a little bit of a discount on sterling against the US dollar, the UK is attractive for long-term commercial investors.”
Decentralization from London
Gordon said he had recently seen some pick-up in transactions of properties in suburban areas of London, as well as in some northern cities such as Manchester, Birmingham and Liverpool. Corporates have been decentralizing from London to those three cities for several years as they can enjoy lower rental costs and more human resources, he said.
“A lot of these areas cannot keep up with a sufficient supply of property developments. From an investment standpoint, that’s a good thing,” he said.
He said the migration of corporates from London to Manchester had been significant over the past 12 to 24 months, partly because of the opening of direct flights between the city and Hong Kong and Beijing.
In December 2014, Cathay Pacific started providing direct flights four times a week between Manchester and Hong Kong. In June last year, China’s Hainan Airlines launched a direct service that made Manchester Airport the only British hub outside London to have non-stop flights to Beijing.
Gordon also said property markets in Manchester, which has two football clubs – Manchester City FC and Manchester United FC – would indirectly benefit from the rising amount of investments coming from China.
In October 2015, Chinese President Xi Jinping visited Manchester City FC’s Football Academy with then UK prime minister David Cameron. Two months later, a Chinese investment consortium led by China Media Capital and Citic Capital bought a 13% stake in Manchester City FC for US$400 million.