Foreign investment in UK property has in the first three months of 2019 fallen to its lowest level since the first quarter of 2016, the three-month period before the country voted to leave the European Union, according to data provider Refinitiv. Cross-border spending on UK property – residential, non-residential, other real estate, real estate management and development, Reits, hotels and lodgings – reached US$598.3 million in the March quarter, a tenth of the US$5.9 billion reported in the fourth quarter of 2018, and a fifth of US$3.3 billion reported in the first quarter last year. “Without a doubt, the reduction in recent investment volumes reflects peak uncertainty among investors as the Brexit endgame is reached. Lower levels of investment have to be expected to continue until a Brexit deal is signed,” said Liam Bailey, global head of research at property consultancy Knight Frank. Since 2009, full-year foreign investment in UK real estate has amounted to at least US$6.4 billion. In 2016, after the Brexit vote, foreign spending tumbled by 65 per cent to US$7.7 billion from US$22 billion the previous year. Last year, foreign investment amounted to US$15.9 billion. Hong Kong investors expect more declines in London home prices But when it comes to residential property in London, Brexit is just one of the issues investors have to grapple with. The city has increased taxes on the purchase of second homes and real estate acquired by companies. “The bigger issues have been the rising tax burden at the top of the residential market, which has meant it has become more expensive to purchase high-value properties in recent years. The fact that the London market reached a peak in 2014, when the main stamp duty reform was introduced, confirms that it has been this issue which has pushed prices lower by almost 20 per cent in many parts of central London. Brexit has been a bit part player by comparison,” said Bailey. Carrie Law, chief executive of property portal Juwai.com, said Chinese inquiries for London properties have been progressively declining. “Chinese buying inquiries for London property were up 53.4 per cent in the first quarter compared with a year earlier, but that statistic hides the fact that inquiries were falling as the quarter progressed. First-quarter inquiries were 1 per cent the long-term average of the past eight quarters,” said Law. The long-term prospects of UK properties, however, remain sound. Patrick Wong Tsu-an, chief executive of Hong Kong-based Tenacity, which bought 70 Gracechurch Street for £271.4 million (US$357 million) in 2017, said the UK's legal and tax systems made it a favoured investment destination. “The UK, like Hong Kong, has one of the best legal systems in the world in numerous aspects, and the UK itself has become like Hong Kong with the lowering of corporate income taxes,” said Wong. John Treacy, international sales director at UK-based property investment company SevenCapital, said housing demand, particularly in cities such as Birmingham and Manchester, continued to outstrip supply of affordable housing, pushing rents higher. London takes hit from Brexit price crash fears “Often, more seasoned investors who remain confident in the market, and certainly, among overseas investors, we have seen a proportion who have seen an opportunity to invest specifically during this period to take advantage of a more favourable exchange rate and slightly slower market,” said Treacy, referring to the pound sterling’s decline by 20 per cent against the US dollar. Jai Gill, sales and marketing manager at London-listed property regeneration specialist Galliford Try Partnerships, said savvy investors can still find excellent opportunities in London's residential property market. “London remains an attractive global city, and looking beyond the Brexit mist, there are some excellent opportunities in the residential property market, which I am sure will see strong growth once the Brexit uncertainty comes to an end,” he said.