While there is a growing suggestion that Chinese investors are still targeting the London real estate market one London agent is suggesting that Chinese investors may actually be looking to reduce their exposure. This would seem to be very much at odds with the current indication that Chinese investors are using London as a safe haven amid growing concerns in their domestic markets. However, if you delve a little deeper it does seem as though many overseas investors acquired London property without actually visiting the premises.
Banking profits
While nobody in the investment world could ever criticise someone for taking a profit the suggestion that Chinese investors are now moving away from London may well be a little premature. Indeed there are some suggestions that the London market has softened of late and while annual growth in property prices hit 6.6% over the last 12 months, is there really an awful lot of downside in the short to medium term?
One interesting fact which has emerged is that while many Chinese investors acquired London property without actually visiting the premises there are some who have effectively “mothballed” their investments. Rather than let the premises and earn at least some income to offset against the significant investment cost it does look as if a number of investors have acquired these properties with the idea of turning them over fairly quickly. Any long-term lease would have potentially complicated a “quick sale” therefore this particular suspicion would seem to have some foundation.
Do overseas investors understand the UK market?
There have also been some comments of late regarding a suggestion that some overseas investors are not fully aware of how the UK market operates. It is no secret that the UK property market has some of the tightest anti-money-laundering regulations in the world and indeed the paper trail required from buyers and sellers has grown dramatically of late. Whether or not overseas buyers understand the mechanics of the UK property market is probably neither here nor there as this is why they employ agents to act on their behalf?
Many investors prefer to look at the bigger picture of a particular market and then employ agents to obtain the relevant exposure. It does seem that many Chinese investors in particular have recently acquired London property “off plan” where the risks are higher but the potential rewards are also greater. Some agents are suggesting that more and more of these “off plan” investments are now making their way to the market as the risks reduce with each development stage.
Opinions make markets
While the general consensus at the moment seems to be that Chinese investors much prefer UK property than their own domestic market, it does take many opinions to make a market. Whether indeed Chinese investors are reducing their exposure to the London market remains to be seen, whether they fully understand the minute detail is also a moot point but the fact is they still have significant exposure as a group.
The UK property market holds many attractions for overseas investors when you take into account the relatively stable currency, impressive economic growth and recent property price performance.