Mainland China investors remain upbeat on UK property markets post Brexit, survey finds

Chinese institutional investors and developers remain confident in UK real estate following Britain’s vote to exit the European Union, even as they continue to be attracted to the US and Australian property markets, according to a new report.

Real estate services company DTZ/Cushman & Wakefield (DTZ C&W) found in an August survey of over 100 institutional and real estate developers from mainland China that 74 per cent of respondents believe Brexit represents a good opportunity to invest in UK real estate within the next five years.

“We’ve found that actually [Brexit] did not temper demand for UK investments from Chinese investors,” James Shepherd, managing director of research for greater China at DTZ C&W, told the Post. “Chinese investors still view the UK as a good place to invest in real estate.”

In fact, around 80 per cent of surveyed investors believe Brexit will improve China-UK relations, making business conditions easier or remaining the same as they were before, the DTZ C&W report said.

But when it comes to short-term investment strategies, only 8.7 per cent of investors said they would put more money into UK real estate on top of existing properties. The majority, 60.9 per cent, plan to dispose of existing British property investments in the next year, and will not make additional investments in the country in the next 5 years.

This falls in line with some of the post-Brexit foreign investment, analysts said.

“Brexit broke a lot of uncertainties,” Landscope Christie’s International Real Estate chief executive Koh Keng-shing said. “Some money [is] moving out of the UK and Europe because there are these uncertainties.”

Investors surveyed on their overseas holdings reported 44 per cent of their overseas funds are invested in the US, followed by 22 per cent in Australia and 10 per cent to the UK.

Chinese investors are entering foreign real estate, especially established markets, in “ever-larger amounts of capital”, the DTZ C&W report said.

Chinese investors have also been a huge factor in driving Hong Kong real estate, Shepherd said. About 6 per cent of investors’ overseas funds were allocated to the city, according to the survey

“Amid a sluggish economy at home, Chinese investors appear to be prioritising perceived safe havens to park capital overseas and diversify an investment portfolio outside of China,” the report said.

Outbound movement of Chinese capital into global real estate has been the result of a supportive government policy, and the desire of investors to shift into foreign currencies amid concerns over depreciation of the yuan, according to Shepherd.

In the UK, while some Chinese investors have pulled away after Brexit, others have seen the country’s real estate as more attractive after the pound depreciated to multi-decade lows, Shepherd said. The pound fell recently to a 31-year low against the US dollar and crashed to its lowest-ever level against a trade-weighted basket of currencies last week.

Shepard believes interest in the UK from Chinese investors will continue as long as the pound versus the yuan remains at its current level.

“It’s still going to be somewhat of a bumpy ride” for the UK, Shepherd said.

The UK attracted US$1.4 billion in Chinese outbound capital in the first half, according to Knight Frank Research.

Mainland investors have concentrated their purchases on Central London. Recent indications are of a pick up in activity.

Major deals in September include China Minsheng Investment Corp’s subsidiary in Hong Kong buying office assets in London worth US$113.3 million and China Vanke acquiring London’s Ryder Court office for US$154 million.

Almost 80 per cent of surveyed mainland investors have said they are interested in UK office assets, the survey found.

“These days you’re seeing … Chinese investors who not only know real estate, but global real estate,” he said. “The recent growth in Chinese investment in overseas real estate seems highly likely to continue over the mid-term.”