Turbulence in the Chinese economy is causing all sorts of headaches for markets around the world, so it may have come as some surprise to read last week that Chinese sovereign wealth fund CIC is closing in on the acquisition of three major developments in the South East to the tune of £250m (22.01.16).
It’s true that the CIC has seen better days; five years of a slowing economy, property market correction and a hugely volatile stock market have taken their toll, but overall demand from China for UK property has not diminished one bit. China has weathered this storm while continuing to be a major contributor to residential sales in the developed markets; mainly Sydney, Toronto, London and New York.
Last summer’s stock-market correction resulted in a short-term slowdown in direct buying appetite from these markets, but for those with cash held outside the reach of China’s overseas investment cap, investment streams still continued. This correction won’t be any different. There may be short-term consequences for developed markets, especially London where recent changes to tax and second-home ownership, as well as a highly valued market, also dampen appetite, but this is not directly linked to the market turmoil.
In Hong Kong, currency appreciation against sterling of circa 10% in the past 12 months due to its peg to the US dollar could make UK real estate look attractive, even in the face of the Chinese headwinds buffeting around the city. In regional cities such as Manchester, where there are many overseas Chinese students, a well-established Chinese community and healthy pipeline of new-build residential stock to come to market, the long-term prospects are promising.
As it stands, the tea leaves suggest any dip in demand will be transitory, but as we enter the year of the monkey, who knows what sort of confusion and volatility may take place. Only time will tell who the winners and losers will be.
Rishi Passi, CEO, Oblix Capital