Spending halves as experts blame profit-taking and Sars, but developers hope exhibitions will rekindle interest Profit-taking combined with the impact of the Sars outbreak has contributed to a steep fall in the value of Hong Kong investment in the British property market, according to experts. The value of Hong Kong investment in British property halved this year, but estate agents and developers hope interest will be revived by a rash of exhibitions in Hong Kong in autumn of swanky new London apartment blocks. Nick Brooke, president of the Royal Institution of Chartered Surveyors, estimated Hong Kong net investment in British residential and commercial property would slump to GBP300 million (HK$3.9 billion) this year from GBP500-GBP600 million last year. Most of this money was invested by Hong Kong families in blocks of flats and offices, and about GBP100 million would be spent in both years by smaller purchasers on individual flats and houses, he said. Mr Brooke said: 'My feeling is that investment has tailed off a bit over the last year or so as Hong Kong investors seek to exit rather than enter the residential market and to take their profits.' Estate agents said the Sars outbreak reduced the number of purchases by smaller investors earlier this year, and the market had only just begun to recover to levels achieved last autumn, which was a relatively quiet period. Ed Lewis, a director at estate agents FPDSavills said: 'It is very early days, but it is definitely more exciting now, more buzzing. Sars took the whole of the spring market out of the system. It is only since the beginning of September that we have seen any activity.' FPDSavills marketed Westminster Green locally last week, and sold 10 of the central London refurbishment's 176 apartments in pre-exhibition sales to local investors. Overall, Mr Lewis considered buyer interest was the same now as at this time last year. The market for British property in Hong Kong is much quieter in the early years of this millennium than during the buying bonanza of the 1990s. FPDSavills researchers found 20 per cent of central London new-build property sold in 1996 went to Hong Kong investors. The most recent figure, for last year, is estimated at 2.5 per cent. According to Knight Frank's research, only 46 per cent of central London's landlords are British, while 11 per cent are 'eastern' landlords from places such as Hong Kong, Singapore and Malaysia. 'The Hong Kong landlord is still the majority among the Asia-Pacific region,' said the international sales director of Knight Frank, Andrew Pang. 'However, many Hong Kong investors buy houses through their companies' names, therefore it is hard sometimes to distinguish a buyer's nationality,' he said. It was even more difficult to distinguish buyers in the secondary market, he added. Agents said that among overseas buyers, investment from South Africa had dried up faster. Mr Lewis said today's big overseas spenders were Arabs and Turks. Irish and Russian investors were also numerous. A pattern was emerging for developers to exhibit more better-quality properties close to transport facilities than in the 1990s. 'The days when you could take out anything, anywhere are long gone,' he said. Mr Pang said Hong Kong investors' money had been diverted to other countries and even some large cities in England for a higher return rate. The price per square foot in central London could be as high as #600 and the rental yield had dropped to 3.5 to 5.5 per cent. He said many Hong Kong real-estate investors would choose other countries, or England provincial cities, over London for higher rental yield. Some provincial England cities, such as Liverpool, Manchester, Birmingham, Bristol and Cardiff, provided yields of 5.4 per cent to 7 per cent. Some of the latest areas to be explored by investors were places like Bali and Phuket, where the return could reach 10 to 13 per cent. The drop in the number of Hong Kong investors was a result of economic sentiment in both Hong Kong and Britain, he said. 'The local London property market has been doing quite well in recent years. Developers and real estate agents are therefore not that keen to promote their properties to overseas buyers,' he said. Centaline Property Agency chairman Shih Wing-ching said the number of Hong Kong people who invested in the British market would fall significantly with the upswing in the Hong Kong market. 'Only loaded-up buyers who can't think of other investment options, and people who have a genuine need for a home in England, will consider buying a flat in England,' he said.