Insights

UK faces huge new wave of Chinese investment

Wealthy Hong Kong investors have been buying overseas property for decades, but now a huge new wave of investment from mainland China looks set to flow into global real estate markets.

Chinese investors have thus far tended to be ultra-wealthy individuals who made their fortune during the Chinese economic boom. Now, however, it is ordinary, middle-class investors who are developing a taste for international property and who look set to be the most significant source of offshore property investment in the years ahead.

According to Juwai.com – China’s largest international real-estate website – China’s outbound investment into residential and commercial property totalled more than $50bn (R680bn) in 2014, and is estimated to grow to around $200bn (R2.7tn) annually over the next decade.

Chinese investors buying property overseas typically have four main motivations: investment, lifestyle, emigration and education.

“For anyone wanting to preserve their wealth, diversification is always an important consideration.”

After securing a primary residence, Chinese investors often turn their attention to the global property markets. With extreme instability in the Chinese stock market and domestic properties already expensive, offshore property markets offer potential investors a secure place to store their money. Furthermore, for anyone wanting to preserve their wealth, diversification is always an important consideration.

Britain is expected to be one of the most popular property markets for new middle-class Chinese investors. London has historically been the focus of much Asian investment but with stamp duty pushing up the cost of buying more expensive properties in prime locations, foreign investors are increasingly opting to purchase a larger number of cheaper properties in more peripheral, suburban areas where transaction costs are lower.

As a result, the new influx of investment from mainland China is likely to impact cities beyond London, notably Manchester, Liverpool and Birmingham. There has been particular interest in Manchester since late last year, when the Chinese president toured the city.

Improved transport links mean that the fringes of London – places like Slough, Ilford and Canning Town – are now also on the radar of Chinese investors. In fact, anything within a 20 to 30 minute travel time of central London is proving popular.

Finally, part of the UK’s attraction to Chinese investors is the absence of the high duties that have been introduced in Canada and Australia which target foreign buyers. However, it is likely that ongoing concerns about foreign investment in UK property will ultimately lead to the introduction of measures to protect local buyers in the UK.

Posted by Rikus Geldenhuys