While many will argue that it’s the profusion of top-ranked universities, unique heritage and rich culture that sets London apart from other world cities, when it comes to Asian investors and their interest in the property industry, it is all about the numbers.
Asians are typically financially rather than emotionally driven when it comes to buying property and so, contrary to public perception, the weakening of the pound against the Hong Kong dollar by around 12% since August last year has been a significant attraction for buyers. Rather than being interpreted as a sign of a flagging economy, savvy investors are taking advantage of the weaker pound and getting more for their money. Effectively, buyers can buy £1m properties for £880,000 as well as making service charges and fees go further.
Another factor is the familiarity of the property acquisition process. For example, our system of requiring upfront deposits, something not practised by our European neighbours, is also the Hong Kong way. While there’s no merit in saying that the UK system is better, Asian investors are naturally and understandably more attracted to a process they can relate to.
On a more aesthetic level, the growth of high-rise living in London mirrors the Hong Kong landscape, which simply isn’t available in other European capitals such as Paris and Madrid, and is unaffordable in established skyscraper cities such as New York. If Asian buyers feel confident in the growing popularity of high-rise living in London then they are far more likely to invest. London’s constant supply and demand quandary reassures investors that such properties won’t be on the market for long.
However, as UK lenders compete to offer the lowest deals and the surge in the domestic buy-to-let market gains pace, London is becoming more attractive and more accessible to UK buyers. Asian investors are aware of the increasing domestic interest and are therefore being forced to make quicker decisions to secure their investment. There’s nothing like a bit of healthy competition to keep things going, as they say.
Neil Jensen is head of operations in Asia at Fraser & Co