The UK government will this week host a five-day trip from the Chinese president despite an array of criticism from political and non-political parties. The president will be presented to the Queen and Prime Minister and enjoy a stay at Buckingham Palace. While much of the focus from the UK media seems to surround the subject of politics and human rights, many investors will be aware of the influence Chinese real estate investors have in the UK.
So how influential are Chinese real estate investors in the UK and would close ties with the UK government help in the long term?
Overseas investment in UK real estate
A report by Savills has cast a very interesting light on the London commercial property market where 70% of the $21 billion 2014 investment in commercial property originated from foreign investors. Chinese property investment totalled $2.2 billion over that period which is only second to the US which poured $3.6 billion into the London commercial property market. The UK is not alone in experiencing increased investment by Chinese investors with the likes of Australia growing more dependent upon Far Eastern investors.
The majority of experts believe that this trend will continue in the short, medium and longer term as restrictions on Chinese overseas investment and closer ties with other governments open up new avenues of interest.
As we touched on in some of our earlier articles, not only is the Chinese economy struggling to maintain recent levels of growth but there are concerns about the financial viability of some of the larger Chinese property companies. This has seen many commercial and private investors from China looking towards the likes of the UK which seems to have a steadier economy, more investor friendly political environment and, perhaps above all, no direct exposure to the Euro. Even though London is expected to be the jewel in the crown for Chinese investors looking to the UK, we should also see increased investment in other areas of the country.
It would seem that many of the larger investors who originated from China may be looking to move to the UK on a long-term basis. Figures show that Chinese investors are now the largest group of foreign buyers picking up London homes worth £1 million and above. Figures for 2014 show Chinese investors bought 11% of these properties which is a significant increase from the 4% level in 2013 and streets ahead of the second largest group of investors, i.e. Russian buyers, at 5%.
The UK government is not the only body to curry favour with Chinese investors using the Chinese government as a direct route to increased exposure. In many ways this works for both parties as it gives Chinese investors (some of which have strong relations with the government) new avenues of investment and also helps to support the UK market. However, if these political relations were to sour there are many other countries around the world who would welcome such investment in their real estate markets.