For years, overseas property investors have concentrated mainly on the London property market. However, this is beginning to change. Indeed, Hong Kong and Saudi Arabia investors saw the potential in the regional markets outside London and have taken advantage of excellent price gains since 2020.
For the last 30 years, overseas property investors have pumped money into the London property market. Lots of jobs, a robust economy, and a booming property market made it an obvious choice.
But across the country, a similar story is emerging. Investors evaluate the property market searching for value and conclude that Manchester, Newcastle, and Leeds offer great potential.
Where are Overseas Property Investors Investing Outside London?
Between April 2020 and April 2021, home prices across the UK increased by 8.9%. In London, properties appreciated by 3.3%. However, in the northeast of England, house prices rocketed up by 16.9%.
But it’s not just appreciation rates that are making investors sit up and take notice. London house prices are twice that of the national average. In a pre-pandemic world, these discrepancies could be justified by proximity to employment. However, several factors have changed the game.
Work-from-home has caused buyers to exit London in search of properties with more space. With fewer people obliged to commute daily, suburbs and regional cities are more appealing.
Meanwhile, successive governments have committed to a policy of decentralisation. While much of this process involves granting power to local governments, there are grants to encourage companies to set up regional offices. Indeed, Goldman Sachs announced a technology centre in Birmingham this April.
Where are Overseas Property Investors Going?
The majority of overseas property investors are focused on private homes for rent, particularly homes for young professionals. The business model is relatively straightforward: develop the property and keep the asset for rent, or sell it on, generally within Asia.
According to Savills, the combined investment into the property market in Manchester, Birmingham and Leeds was over £1bn in 2020. This figure constitutes a staggering £630m growth in two years. Better yields offered in the regions are one of the most significant factors in these increased investment flows.
Indeed, as long as regional cities offer better investment opportunities, the pattern will continue. Many major UK banks and finance are not interested in regeneration because of the risks involved. Without the help of overseas property investors, the UK’s housing shortage would be much worse.
For investors, finding opportunities outside London is producing higher yields. For many professionals, work from home is here to stay, which will allow a more flexible approach to buying housing in different areas.
With many cities around the country benefiting from the work of overseas property investors, other cities have begun to take note. With many areas in need of regeneration, these investment flows could be precisely what the country needs.