Wealthy Chinese investors are going to make Britain’s housing crisis even worse
Predictions that a new wave of investment from mainland China is on the horizon will stir further debate over the measures British politicians might use to protect local home buyers.
The anticipated influx of money from mainland China into the UK is set to affect not only London – historically the focus for much east Asian investment – but cities such as Manchester, Liverpool, and Birmingham, to which more of the investment is now heading. “Those seem to be the hotspots,” says Neil Jensen, the Hong Kong-based regional director for London estate agent Fraser & Co, who promotes developments in the capital to Asian investors.
A particular spotlight has been shining on Manchester since last October when Chinese president Xi Jinping toured the city to support George Osborne’s “northern powerhouse” project during his first state visit to Britain. Jensen says Fraser & Co, founded in 1995, has traditionally specialized in London properties which it markets internationally through offices in Dubai and Hong Kong. However, he is preparing to offer his clients their first major investment opportunity outside the capital in a project specifically designed to attract Chinese money.
Called “New Chinatown” – or Xinhua Bu (New China Wharf) in Mandarin – the £200m venture in Liverpool describes itself as “one of the most important and exciting developments in the UK today” and promises to be “one of the UK’s most luxurious and desirable residential destinations”. You can’t just put up a block of flats in Liverpool and expect people to buy it – there has to be a story.
The development’s website boasts: “It is the burgeoning energy and dynamism of modern China transplanted into the heart of a historical World Heritage City.” Adding: “This is a historic moment … This is a unique investment opportunity. “Underpinning the whole masterplan is the idea and motif of the awakening dragon – a powerful symbol of China’s resurgence and status as a new global power.”
Jensen says improving transport infrastructure in the northwest and relatively low prices meant New Chinatown – where two-bedroom duplex penthouses are on offer for up to £546,427 and ordinary one-bedroom flats from £119,211 – would be a hit with Chinese investors. “You can’t just put up a block of flats in Liverpool and expect people to buy it … If you want foreign buyers, there has to be a story,” he says, adding: “They’ll probably go quite quickly.” The fringes of London have also come onto the radar of Chinese investors, thanks to Crossrail, a £14.8bn, 73-mile MetroLink cutting west to east across the capital, which is set to open in 2018.
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“Most of your investors 20 or 30 years ago would have been going more towards the bullseye in dartboard terms,” Jensen says, referring to the centre of London. But improved transport links are now drawing foreign investors to Slough, Ilford, and Canning Town. “The commuter area – anything within a 20-30 minute travel time [of central London] is hot,” says Jonathan Gordon, a director at IP Global, a Hong Kong property investment firm that is promoting projects in Ilford and Croydon and has previously invested in Slough.
Mercury House, Slough
Mercury House, a new development in Slough being marketed in Hong Kong. Illustration: Fraser & Co
“Slough has got Crossrail going through it so you can get to Bond Street in no time,” he says. “It is those sorts of stories we are interested in as opposed to buying in Bond Street itself.”
Crossrail is not the only reason foreign investors are now looking to the capital’s outskirts, though. Investors and industry insiders say stamp duty increases targeting wealthy foreign investors have pushed up the cost of buying more expensive properties in prime locations. That has led many foreign investors to buy a larger number of cheaper properties in more peripheral, suburban areas, says Gordon, where “transaction costs are lower.”
One veteran Hong Kong investor, with a portfolio that includes properties in London, Manchester, and Liverpool, explains: “You buy many properties, but lower-priced ones … You pay something like £200,000 or £250,000, rather than £1m for zone one in Mayfair, places like that.” This new wave of Chinese investors includes Jody Ye, a 30-year-old from Chongqing, a metropolis in southwest China. In July, Ye paid £200,000 for a flat in Bristol, where she went to university and now lives. She is planning to buy her second UK property. “Repurchasing a property home is too expensive,” she says. “Investing in the UK is much more cost-efficient.” Bristol is not only “a great place”, but, she adds: “British people think Bristol is posh.”
The Hong Kong headquarters of Juwai.com
The Hong Kong headquarters of Juwai.com
Fan Feifei, 34, from Xi’an, is another Chinese buy-to-let investor. She is preparing to purchase her third property in Birmingham. “I bought it purely for investment,” she says of her second purchase, a £135,000 home in B29, which she rents to overseas students. “Since 2014, Chinese people have been rushing to buy houses in the UK,” adds Fan, pointing to high rental yields and stable property prices as key driving factors. “All the Chinese people around me are buying houses or have already bought several houses in the UK, and I’m the one who has bought the least, with only two.”
Song Dongzhe, a third mainland investor from the north-eastern city of Dalian, bought his first British property – a three-bedroomed house in Selly Oak, south-west Birmingham – in 2012 for £125,000. Earlier this year, he bought two more. Song says the UK is “beautiful to Chinese property investors,” largely because it does not have the high duties that have been introduced in Canada and Australia targeting foreign buyers.
High prices in London make it “too risky” to buy there, he adds. But “as the UK’s second-biggest city, I thought Birmingham was a choice that made sense”. A fourth mainland investor, who declines to be named, says President Xi’s tour of the UK convinced him Britain was the right place to invest his family’s fortune. Property in major Chinese cities such as Beijing, Shanghai, and Shenzhen is now too expensive, the Shanghai investor says, and China’s stock market is “volatile – so I think it’s a good time to invest in [the] UK.” As well as London, he says he is now looking at opportunities in cities such as Birmingham, Manchester and Edinburgh.