Property investors readjust their sights away from the UK

Canada, Australia and the US seen as safer alternatives, in the wake of political and economic uncertainties created by Brexit

PUBLISHED : Tuesday, 12 July, 2016, 6:23pm
UPDATED : Tuesday, 12 July, 2016, 7:28pm

Realtors in Canada, Australia and the US are pitching their countries as relative safe havens for property investors, as growing numbers of Chinese buyers start to view Britain a riskier prospect in the wake of the recent Brexit vote.

“We have seen more enquiries from people looking into US properties, as they believe the country has a more stable political environment and is on course of an economic rebound,”said Mandy Wong, head of international residential property services at JLL.

“The most popular locations include Los Angeles, San Francisco and New York, as well as inland places such as Chicago.”

Three weeks after Britain’s stunning EU referendum result, potential international investors into the country appear to be sitting on their hands until its political and economic uncertainties fade.

Real estate agents say others have already started shifting their sights onto more reasonable “safe-haven alternatives”.

Britain is still to install a new prime minister, and EU officials continue to voice their concerns over a potential crisis facing the 28-nation bloc in the post-Brexit era.

“As a more risk-averse investor, I would favour California over London at the moment,”said Hongwei Tan, a senior executive at a mining firm in southern China, who has travelled to Europe and the US this year, partly for home viewing.

“California has a nicer climate, a bigger Chinese community and more importantly a stable economy,” Tan said.

Some industry experts argue, however, that it is still too early to tell if Brexit will attract or warn off UK property buyers, especially as some new projects in central area of London continue to draw strong interest from around the world.

Charles Pittar, the CEO of Juwai.com, a leading international property portal, said Brexit actually helped push a 100 per cent, week-on-week increase in consumer enquiries for UK property during the week of the vote.

Though there is no data yet to support any shift in interest, agents remain confident in the prospects of markets outside of Britain as they consider high-net-worth individuals like Tan will be more inclined to park their capital in relative “safe harbours”, according to KC Sanjay, senior real estate economist with American real estate consultant Axiometrics.

“Patrons from other nations could look to shift their investing from Britain to the US.

“A weakened London market could spur more money towards New York,” said Sanjay.

The sentiment is also being fuelled by a loosened grip on investment by foreigners by Washington, after it reduced the tax burden on various property transactions last December.

Cities across the US “are going to be the next wave of targets” for Chinese investors in terms of commercial properties, reckons David Ji, head of research and consultancy in Greater China at Knight Frank, a global real estate services firm.

Riding on a steady economic recovery, property prices in the US are projected to rise two per cent in 2016, with some sought-after sites expected to register 10 per cent growth, according to a report by Global House Buyer, an overseas real estate portal in Beijing.

In comparison, the ratings agency Fitch predicts house prices in Britain to plunge by as much as a quarter in the event of a Brexit.

“Investor concerns have been well reflected by the suspensions of a couple of funds investing in the country’s property since Brexit,”said David Hui, director for China and overseas sales at property agency Centaline.

“Transactions in the British property market could pick up, but only after people have a good idea of how the ingoing prime minister is to steer the country,” he added.

On Monday, Standard Life Investments suspended trading in its UK property fund, as investors attempted to withdraw their money.

The UK’s shock decision to reject the European Union has also raised the chances of further monetary easing in Australia, with home prices now expected to rise eight per cent in 2016.

“Australia is going to be seen as increasingly safe, particularly in this volatile environment,” Nerida Conisbee, chief economist of Australian real estate website REA Group, wrote in a note addressing the EU referendum fallout.

Brett Harley-Wilson, director of international with Homelink, the mainland’s biggest realtor, suggested that while Brexit’s immediate boost to Chinese investment in homes in Australia was “not significant,” a larger impact may be seen in commercial property investment.

“We are going to push ahead with more projects around the Gold Coast in the near future aimed at Chinese investors,”he said.

Meanwhile, new student visa regulations to help streamline paperwork for Chinese applicants, could also increase property buying, Harley-Wilson said.

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