Property investment

China’s Country Garden makes first foray into London with £400 million residential project

The deal to build 785 homes in Poplar, East London, follows the developer’s setback in its Malaysian mega project where Beijing’s capital curbs have dented sales

PUBLISHED : Wednesday, 04 April, 2018, 1:32pm
UPDATED : Wednesday, 04 April, 2018, 10:47pm

China’s largest developer by sales, Country Garden, has bought a plot of land in London, its second major overseas foray after Beijing’s crackdown on capital flight sent sales at its Malaysian mega project tumbling.

The builder bought the residential site in Poplar, East London, for about £80 million (US$113 million) and plans to turn it into a £400 million development of 785 homes, a Country Garden executive told the Post on Wednesday.

It partnered with a Hong Kong fund, which Country Garden declined to identify, as part of a consortium to purchase Ailsa Wharf, near the River Lea, from local developers Galliard Homes and Lindhill. 

The development is slated to comprise 556 private apartments, 229 subsidised homes and four villas, as well as shops and public space, according to the executive, who spoke on condition of anonymity. Building work is likely to start in the summer, with the first properties due to be completed in 2021.

The investment comes despite Beijing’s efforts to intensify capital controls by clamping down on overseas shopping sprees by acquisitive firms including property developers.

Chinese buyers retreat from global property market as Beijing restricts deals

Country garden is not the only Chinese developer targeting the UK capital’s property market, apparently unperturbed by the crackdown. According to CoStar News, Beijing Zhaotai is also making its London debut with a £145 million deal to buy a prime City of London office building from Morgan Capital Partners. The development at 45 Cannon Street comprises 81,000 square feet of grade-A office space as well as restaurants and retail space.

Country Garden’s purchase of Ailsa Wharf follows the disappointment of its sprawling Forest City project in Malaysia, which has seen sales fall as tighter capital curbs put the brakes on outbound investment. The project, including homes, office towers, malls and schools, had been touted as being worth US$100 billion in investment over 20 years.

Country Garden halts Malaysian housing sales amid capital flight crackdown

Sales slid last year to 8 billion yuan from more than 10 billion yuan in 2016 as mainland investors found themselves unable to shift their cash out of the country.

“The purchase [in London] is financed overseas so it totally complies with state policies,” said the Country Garden executive. “Unlike the previous Malaysia project which mainly targeted Chinese, this project will target locals.”

Country Garden has a market capitalisation of US$44.8 billion, and in 2017 it topped China’s developers with contracted sales of 550.8 billion yuan, more than half of those in third- and fourth-tier cities.

Chief Financial Officer Wu Bijun said in a recent results briefing that development will not slow down this year despite the tougher financial conditions imposed by Beijing.

China, including Hong Kong, was the biggest foreign buyer of London property last year with investment totalling £7.34 billion, according to JLL data.

Zhang Ping, standing director of International Federation of Finance & Real Estate, said a big draw for Chinese investors is the high liquidity of London properties. Although Brexit has ushered in uncertainties, foreign investors still have confidence in the city’s status as an international financial centre, and the fall of sterling also creates opportunities.

“Last but not the least, as more Chinese investors are bound by state-imposed capital controls, this actually give companies with overseas financing channels an advantage as they face less rivals when bidding,” she said.

CC Land marks first overseas investment with £290 million purchase of office building in London