Asian investors snap up UK property, defying Brexit jitters
ASIAN INVESTORS remain confident in the United Kingdom, despite many unanswered questions about Brexit, the country’s decision to leave the European Union, according to a new report from JLL.
JLL, a property consultancy, says real-estate transaction volumes in the UK for the first quarter of 2017 were at their highest level since 2015, in local-currency terms.
The research shows that the UK led the way as the most active real-estate market in Europe and became the world’s most traded city, compared with third place last year.
“With the sterling depreciation and slight drop in capital values, Asian investors – particularly private buyers from Hong Kong and [mainland] China – have been the most active in London since last year’s Brexit vote,” said David Green-Morgan, head of research, global capital markets, at JLL.
“The depreciation and capital-values drop means that UK commercial real estate is now discounted by 16 per cent on average to overseas capital since the June 2016 referendum. The net yield of City [of London] prime buildings is also very attractive.”
Hong Kong buyers spent nearly US$3 billion (Bt104 billion) exclusively on UK properties in the first quarter of 2017, compared with only $842 million in the same quarter of 2016, snapping up offices in London’s City and West End, outspending global funds and all other foreign groups combined by nearly $1.3 billion.
Asian buyers also continue to seek properties in the United States, despite broader political and economic uncertainties.
“In line with recent trends, Asian buyers were among the most active investors in the US, with investors from Singapore, Japan and China driving most activity,” Green-Morgan said. “Investors from Singapore and Japan acquired offices in New York, Boston and Washington, DC, as they renewed their focus on core assets in global gateway cities.”
Despite increased government scrutiny, Chinese outbound capital increased by 84 per cent in the first quarter of 2017 to $7.5 billion, compared with $4 billion in the first quarter of 2016. Mainland Chinese buyers continued investing in Hong Kong, Chicago, Los Angeles and San Francisco.
However, overall outbound real-estate transaction volumes were down by 36 per cent compared with the fourth quarter of 2016. The shortfall in outbound capital was confined to investments in Australia and Hong Kong, with cross-border buyers focusing mainly on core central-business-district office assets, retail malls, and properties in niche sectors such as senior housing.
“The new outbound capital-control measures are likely to slow down overseas investments, as Chinese corporates and individuals will find it harder to invest outside of China. This is driving an increase in demand for domestic real estate investment going forward,” said Dave Chiou, director of capital markets research, China, at JLL.
“However, for Chinese companies with established overseas presence, the impact could be limited, as they can use funds regenerated from overseas branches for investments.”
Overall, global transactional volumes for the first quarter of 2017 were $136 billion, 1 per cent below the same period last year. Asia-Pacific investment volumes remained consistent from 2016, rising by 1 per cent. Europe saw a strong increase in activity as volumes climbed 3 per cent, while the Americas fell by 5 per cent.