How will Brexit impact Chinese investment in UK property?
Chinese demand expected to continue despite Brexit
The UK may be one of the smallest countries in the G7, but the Chinese investment passion for it has been one of the biggest love affairs in the property industry.
And now, despite the heat of the Brexit debate leading up to the shocking referendum results of Britain voting to leave the European Union (EU), Chinese buyer demand for UK property is still expected to remain strong.
46% of respondents in a recent Juwai Brexit Survey said they felt demand for UK property demand would go up if Britain exited the EU.
Not only does a weaker pound make for enticing investment opportunities, the UK has always offered appealing lifestyle factors that will continue to be strong basis for Chinese to invest in UK property.
Back in 2012, Chinese investors reportedly bought 5% of all Central London properties sold1 – that same year Hurun Report ranked the UK among the top five travel locations for Chinese high-net-worth individuals (HNWIs).2
Now, in the first two months of 2016, Chinese invested £560.3 million (US$792 million) in London-based commercial property – equal to 40% of the total of £1.2 billion (US$1.69 billion) recorded for the whole of 2015.3 Numbers like that have surely made industry experts fairly confident about forecasts that Chinese investment in London alone will exceed that of 2015.
Juwai Data shows a similar trend – Chinese enquiries for UK property on Juwai.com grew 17.98% in Q1 2016 alone, with enquiries on property listings valued at $1.79 billion in terms of consumer enquiry value.4
Chinese buyers not expected to be negatively impacted by Brexit
The Juwai Brexit Survey, which sourced the opinions of industry experts and investors in both the UK and China, unveiled that most respondents believed the Brexit impact would be insignificant in terms of Chinese property investment in the UK.
In fact, although UK respondents were more uncertain, China respondents indicated that – despite some holding back from transactions until after the vote – international demand for UK property was expected to increase no matter the outcome.
Furthermore, 71% of China respondents said there would be either no change or more demand for UK property should Britain leave the EU.
Juwai.com believes the UK will continue and even grow as an important destination for Chinese property investment. Chinese consumers see UK property as a relatively safe investment compared to alternatives, and consumer demand is in large part driven by lifestyle factors, with education being the top motivator.
For students continuing their educational pursuits overseas, the UK still offers world-class universities and schools, which will continue to be in high demand. With all these factors combined, Chinese demand for property investment in the UK should remain strong for years to come.
Juwai.com CEO Charles Pittar even notes that developers and estate agents are likely sharpening their marketing pitches at this very moment, pointing to Brexit as an opportunity for offshore buyers to snap up properties at bargain prices.
“The vote for Brexit introduces some uncertainty into the market. In a backwards way, this could promote foreign property investment. If the pound loses ground on a sustained basis and domestic buyers drop out of the British property market, the results of the vote could lead to increased opportunities and a more appealing environment for foreign investors,” he adds.
This is in line with the 46% of respondents in the Juwai Brexit Survey, who indicated they felt there would be more demand for UK property if Britian exited the EU.
“If the fall in the pound persists and if local buyers continue to sit on their hands to some degree, that will create a more appealing environment for international investors...and Chinese buyers are much more likely to take note of property prices, exchange rates, available inventory and economic conditions than the simple fact of Brexit, however,” Pittar says.
Chinese consumer enquiries into U.K. property on Juwai.com in June has remained strong with a positive outlook expected still, and we'll be watching closely to see just how things unfold for UK property seekers as Brexit looms.
Sources: 1. Knight Frank: International investors spent £2.2 billion on central London new-build property in 2012; 2. Hurun Report: Europe Winning the Hearts of Chinese Luxury Travelers; 3. Savills: Chinese investors continue to pursue UK assets; 4. Juwai IQ Data Q1 2016; 5. Juwai Brexit Survey