PACL Case: Sebi Invites Bids For Sale Of Properties
Speaking in his Hong Kong office, property promoter Gordon predicts that, as has happened elsewhere in the world, concern over foreign investment in British property will eventually lead to the introduction of measures to protect local buyers. “There is that underlying discontent in some camps to say: ‘Well, it’s not on, it’s not fair – releasing and selling all this property overseas.’
“I wouldn’t be surprised if, going forward, there is some legislation that says a certain percentage of properties have to be sold or marketed locally for a period of time, and then it is fair game overseas [after that].” Australia, currently the second biggest destination for Chinese property investment after the United States, has been cracking down on foreign buyers since last year, after complaints that China’s voracious appetite for property in cities such as Sydney and Melbourne was pricing local buyers out of the market.
Hong Kong, a semi-autonomous city that returned to Chinese control in 1997, has also been fighting to quell a huge wave of often speculative mainland investment in residential property. In a bid to rein in sky-high prices, authorities in the former colony have rolled out a series of cooling measures in recent years, including tighter lending rules and higher stamp duties. Victoria Allan, an Australian real estate entrepreneur who specializes in leasing and selling property on Hong Kong island, says: “The price point has moved so high in Hong Kong that it’s hard to buy a house anymore for under US$10m that, five or six years ago, you could buy for $5m.”
Allan, a founder of Habitat Property, says efforts to stem the flow of mainland money into Hong Kong have diverted a significant amount of Chinese investment elsewhere. “It’s moved into Australia and the UK; it’s moved into the US. And it has really pushed those markets up as well.” Allan believes that the Hong Kong government pushed back too hard against the influx of mainland money and advises British policymakers to avoid taking too drastic steps.
“I would definitely say: don’t shut it out totally. That was our mistake. I think Hong Kong has approached it too harshly. Why shut the door totally?” Allan argues that by locking mainland Chinese real estate investors out, “the whole economy suffers, not just the property market. There has to be some kind of balance. We are supposed to be an international city. “Maybe some tax is applicable,” she says, “but I think there is a way to manage it in a really positive way for everyone. Particularly if that is done in conjunction with town planning and helping direct the investment into towns and city centers that need assistance with good housing. There are great ways to make the investment.” Repurchasing a property home is too expensive. Investing in the UK is much more cost-efficient.
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Jensen also warns against demonizing foreign investors, who he says play an essential role in helping developers build new homes. “You can’t be a world city and not have foreign investment. “There’s a lot of schemes going up, but how on earth are they going to fund them?” he asks. “The banks don’t have the money … So you’ve got to rely on overseas investment, be it funding by way of people buying them, or by someone saying, ‘OK, we’ll buy the site and the development, and we’ll sell it back to the Brits’.”
Li says he recognizes the controversy surrounding foreign investment but shrugs it off as a natural phenomenon: “I think even in Hong Kong we face the same problem. You just can’t avoid it; it’s supply and demand. Everybody wants to live in the best location, right?”
But not everyone is convinced Chinese investment in overseas property will continue to soar. Gordon says the scale of future investment will depend on the health of the Chinese economy and the enthusiasm with which Beijing enforces capital controls limiting how much money individuals can remove from the country. Others believe the uncertainty caused by Brexit will put the breaks on further moves into the UK.
Concerns over the risk involved in some UK developments may also curb enthusiasm for off-plan investment. For months, rumors have been swirling in Hong Kong about major developments that appear to have collapsed after the developer went bust, leaving investors struggling to recoup their money.
Gentrification is a global problem. It’s time we found a better solution
Today we begin a new series looking at the impact of gentrification and rising housing costs worldwide – and the ways some cities are trying to tackle this global phenomenon.
During a demonstration outside the British consulate in July, protesters held up placards reading: “Home is where the fraud is” and “A scam of two cities.” Property industry insiders argue foreign investment from places such as China is helping transform urban centers around the globe. It is the only way to finance affordable new homes in cities such as London. “I think a lot of it will be positive on the basis that this is fuelling regeneration,” Gordon says of the coming wave of Chinese investment in UK property. “It’s creating jobs, it’s improving infrastructure, and it is making, generally speaking, the quality of life better.”
But London mayor Sadiq Khan has warned against the capital’s homes being used “as gold bricks for investment.” He has spoken out over how some new developments are touted to foreign investors before local buyers. “There is no point in building homes if they are bought by investors in the Middle East and Asia,” the mayor said in May. “I don’t want homes being left empty, and I don’t want us to be the world’s capital for money laundering. I want to give first dibs to Londoners.”
Additional reporting by Christy Yao in Beijing
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