The winds of change are blowing from the East: Hong Kong and mainland China based buyers are investing in Prime Central London property
By Qandor member Gary Hersham, Founding Director of Beauchamp Estates. In this article, he explores the surge in Asian property buyers investing in London.
The UK has had a long and special relationship with Hong Kong, something that has endured from the 1997 handover of the territory by the British back to China. Hong Kong-based buyers and investors have always been present in the UK’s prime property market at varying levels, but recent developments in the region have seen this activity increase and encompass buyers and investors from mainland China as well.
Hong Kong (HK) and mainland Chinese investment in luxury Prime Central London residential property has soared to new levels, despite the global COVID-19 pandemic: leading real estate agency Beauchamp Estates, whose headquarters are in London’s Mayfair, believes that HK and mainland China buyers are currently accounting for 15% of international buyer home sales above £1 million across Prime Central London and 20% of all sales above £10 million. The figures could go higher with the proposed HK visa changes set to open the door to UK citizenship.
Since the UK’s General Election in 2019, Beauchamp Estates has sold over £300 million worth of luxury London residential property to HK buyers, in locations including Knightsbridge, Belgravia and Islington: Chinese/HK buyers are presently Beauchamp Estates’ single largest group of overseas clients investing in London luxury property, followed by Russian and Indian clients.
According to the Office for National Statistics (ONS), HK and mainland China buyers invested £7.69 billion in London property in 2019, including over £750 million in residential property in the City of Westminster and the Royal Borough of Kensington & Chelsea: it is little wonder that some leading newspaper titles are starting to refer to the capital as Beijing on Thames.
The ONS data also shows that there are now some 218,975 properties in London owned by Chinese/HK buyers (98,725 owned by HK based buyers and 120,250 by mainland Chinese), making London property the most popular investment destination for Chinese in the world.
Beauchamp Estates are seeing five distinct types of Chinese investors purchasing property in London:
The first group are purchasing one and two bedroom new build rental-investment apartments priced up to £2 million in locations including Canary Wharf, Islington, Battersea, Chelsea and Fulham (investors are looking at a 3-5% yield) and often purchase off-plan and in bulk in order to gain a price discount/advantage.
The second group are affluent upper middle class Chinese and Hong Kong families, typically spending between £5 million to £10 million for a London family home/luxury pied-a-terre in locations including St John’s Wood, Marylebone or Regent’s Park or £750,000 to £1.5 million for an apartment in Aldwych, Soho or Fitzrovia for their student offspring studying in London: For these families, proximity to good schools or universities is essential. Marylebone and St John’s Wood are particularly popular as they are close to good education facilities and to the Chinese Embassy (49-51 Portland Place), where the Chinese political elite working in London are based.
The third buyer group are mainland China and Hong Kong’s super-wealthy business elite who will spend upwards of £15 million on a trophy property, typically something with a prestigious history or ultra-luxury design, located in London’s most prestigious addresses. Beauchamp Estates’ experience has been that this elite group prefer to buy either mansions in Knightsbridge, Mayfair, Belgravia or Avenue Road in St John’s Wood, priced from £25 million to over £200 million, or penthouses in trophy apartment buildings such as Clarges Mayfair, One Hyde Park, 20 Grosvenor Square or No.1 Grosvenor Square priced from £20 million up to £80 million.
The fourth buyer group are China and Hong Kong’s large corporations and property developers. These corporations either invest in commercial property in the City, Canary Wharf or West End, or undertake direct or joint venture residential projects in the capital. Over 40% of London’s office investment deals by international firms over the last two years have been done by Hong Kong corporations, including CC Land, CK Asset Holdings, Nan Fung Group and Sino Group. Chinese property corporations have undertaken joint ventures with domestic London developers; examples include Sun Hung Kai Properties with Ballymore and Vanke with Galliard Homes.
The fifth buyer group are Chinese Sovereign Wealth entities such as CIC, which has been a major investor in London real estate.
“Wealth creation and the development of the property markets in Europe has taken 200 years”, Marcus O’Brien, of Beauchamp Estates Private Office comments, “while in China the same process has taken just 20 years. This huge acceleration of wealth creation and property development in China – some cities take just six months to construct – has provided China and Hong Kong with a “new money” middle class and a new money super-rich elite.
“Because China’s wealth is so relatively new, Chinese and Hong Kong buyers in London like purchasing either new homes or historic properties which have newly refurbished super-luxury interiors. The Chinese middle-class life is focused around family, whilst the business elite have a very consumer-concentric culture. They want to be seen to be successful when benchmarked against their peers, so if one buys a London property, a business rival needs to acquire an even better one.”
The five different types of Chinese investor we are generally seeing in the capital are usually discrete, but sometimes these groups overlap. For example, a large HK corporation buys commercial property in the City, followed by the CEO buying a £100m mansion in Belgravia.
The predominance of Chinese buyers (whether mainland China or HK) in the market has not been diminished by the COVID-19 pandemic and perhaps has been spurred on by current poor Chinese bilateral relationships with the USA, Canada and Australia. Formerly many of the Chinese/Hong Kong elite would have purchased property in Malibu, Los Angeles, the Hamptons and Toronto, but they have now retreated from these locations, preferring to invest in London, where there is a long established and sustained relationship.
Despite the UK’s citizenship offer, which could see potentially up to three million HK residents leave for the UK, many do not expect a mass exodus from the territory. While some feel that the territory has changed and that the dynamic, energized Hong Kong of old no longer exists, there are many who wish to remain.
Hong Kong is still an important regional hub for neighboring regions/counties and a key commercial centre. Wealthier residents have always invested in property around the world, with many already holding homes overseas, which may also infer passport entitlement (with conditions). However, if just 10% of the top elite in Hong Kong take up the offer of residency in the UK and buy homes in the capital, this will drive around 15,000 property deals, which would have a massive beneficial impact on the housing market in the UK and in many of the capital’s best addresses.
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