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HONG KONG and mainland investors are pouring millions of dollars into overseas property based on fears about the future political stability of China, a property consultant claims.

  Alex Charalambous, manager of the Hong Kong office of British property consultants Brian Lack & Co, said he expected the surge of interest in British property from Hong Kong and mainland buyers, which started last year, to continue.

  Australia and New Zealand were also targets for home buyers from the territory. There was also an influx of Hong Kong and mainland money into property in Singapore and Malaysia last year, he said.

  Fears about the effects of a leadership crisis on the death of Chinese patriarch Deng Xiaoping and the handover of the territory to China in 1997 were persuading many people in Hong Kong and the mainland to divert funds abroad.

  The relative political stability of Britain and its improving property market were tempting Hong Kong and Chinese buyers to invest there, he said.

  Brian Lack was considering opening offices in China to take advantage of the growing interest in British property, Mr Charalambous said.

  'Although China has repeatedly assured the world there will be a smooth transition, history tells us otherwise,' he said.

  'The period leading up to, and immediately after, Deng Xiaoping's death is seen as crucial for the region's future stability and a good time to transfer finance further afield.

  'Increasingly, we have been informed of the interest by one or a consortium of buyers from China who, for obvious reasons, cannot avail themselves to the world.'   Although the returns offered on London residential properties were lower than those in Chinese cities, where returns of up to 50 per cent were available, Britain was considered more politically stable for investment by many mainland investors, he said.

  'We see this as a potentially huge factor in the future and, with a change in leadership in China now looking like it will happen in a matter of months . . . it is our belief that, before the end of 1995, they [mainland buyers] will be responsible for a large share of purchases in Britain.

  'This is assuming a hard-line policy is not implemented by the current leader's successor.'   The onset of the 1997 handover was also encouraging Hong Kong residents to invest more overseas, even if they intended to live in the territory after the transition, he said.

  Uncertainty about how China's communist government would manage the 'world's most capitalist society' would result in more Hong Kong money going abroad.

  In particular, investment in the London residential market would rise, because there was a consensus that now was the right time to invest there.

  Investment returns ranging from seven to 12 per cent on London residential property would continue to appeal to investors this year, particularly as many of these returns were guaranteed by the developers and, in some cases, the banks.

  The rental guarantees, ranging from seven to 10 per cent over one or two years offered by many British developers for new projects, were attracting Hong Kong and mainland buyers, he said.

    Mr Charalambous reminded buyers that the cost to the developers of providing the rental guarantees were built into the asking prices.

   He believed the availability of cheap mortgages in Britain and the favourable Hong Kong dollar/sterling exchange rate were extra incentives to buy there.

  Meanwhile, with sales prices reaching GBP1,350 (about HK$16,200) per square foot for homes in Asia, maximum rental returns in the region were rarely above seven per cent, making the higher returns achievable in London appear attractive, he said.

  In Hong Kong and other Asian cities, rents had been unable to keep up with an unprecedented sales boom over the past three years, pushing rental returns down.

  'There is also a feeling that sooner or later the bigger overseas companies will either start to relocate to cheaper locations or begin 'localising' staff,' he said.

  He felt such moves would damage the rental markets in cities like Hong Kong where corporate tenants had helped underpin demand.

  Sliding values at the middle to top end of the Hong Kong residential sales market during the past 12 months was also resulting in many Hong Kong investors looking to buy abroad.



Wary buyers stow cash abroad for stable future