In 2015, the then Chancellor of Exchequer George Osborne remarked, “no economy in the world is as open to Chinese investment as the UK.”
Whilst perhaps he was attempting to tempt and showcase the UK’s opening relationship with China, there are several statistics that arguably prove his point and there are are several key reasons why Chinese investors and Chinese property investors have focussed on the UK and its major cities. Furthermore, Chinese entrepreneurs have invested around £50 billion into UK companies in the last 10 years.
In May 2021, a report from The Sunday Times wrote that Chinese investors had built up a portfolio of UK businesses and property worth almost £135 billion and that more and more Chinese investors are choosing the UK as a destination to invest their money.
Thanks to huge rental yields and relatively low market value house prices in the UK, compared to the major US cities, the property market is a great opportunity for international buyers, in particular Chinese investors.
A report from Property Investor in 2021 explained that due to rapidly rising property values in China, the Chinese government implemented over 300 new regulations to address levels of speculative property investment. This then has resulted in an increased appetite to invest in UK property, which offers higher rental yields than Chinese property and this trend is continuing as more Chinese investors see the UK as an attractive location to buy property. In 2019, Chinese buyers accounted for over 10% of UK properties valued at over £1 million.
As the world gets to grips with COVID 19 and investors now look for stable investment assets with predictable returns, Chinese based buyers see the UK as a real safe haven and in July 2020, the Chinese international property portal Juwai.com saw a 213% increase in enquiries for UK property.
China is the second-largest wealth market in the world and has the largest number of people in the top 10% of global wealth distribution. It is home to 2.3 million high-net-worth individuals, or HNWI’s, (an individual with no less than $3 million in investable wealth), and 26,700 ultra-high-net-worth-individuals (UHNWI) – a person with $30 million in investable wealth. Additionally, a report from Property Investor noted that China’s middle class holds £27 trillion in investment assets, with predictions that this will increase to £33.5 trillion by 2025.
There are several reasons why Chinese interest in investing in the UK is high and growing. The UK is widely recognised as an ideal location for Chinese property investors. Firstly, it is important to understand exactly what motivates Chinese investors to buy property in the UK.
Research from Juwai.com in 2020 outlined exactly what Chinese investors look for in a property.
- 83% of Mainland Chinese intend to educate their children overseas
- 61% of affluent Chinese buy international real estate for investment diversification
- 61% of wealthly Chinese buy real estate abroad to live in
- 37% purchase overseas property as their primary residence
- 56% of China’s HNWI’s have either migrated or intend to
- 4% of wealthy Chinese invest in international property for rental income
- 28% of wealthy Chinese invest in the US for rental income
These statistics indicate that Chinese investors are looking abroad for education, investment diversification and they want to have the option to live in the country they purchased a property in.
The UK as an investment destination has also benefitted from the deteriorating relationship between the US and China, which has focussed the minds of Chinese investors to look at the UK as home for their overseas capital investments. Even with some recent bumpy ground in the diplomatic relationship between the UK and China, Chinese investors see the UK with it’s deeply liquid and well-regulated property market, as an ideal place to invest their cash.
Evergrande has become a symbol of the difficulties facing China’s domestic property sector. After expanding and borrowing at breakneck speed, Evergrande has struggled to find the cash it needs for overdue bills, outstanding loans and back wages for the workers who have built millions of its apartments across China. Out of cash and out of time, Evergrande now owes more than a million apartments to home buyers who have already put money down. This is another key reason why Chinese investors are looking to diversify from their own domestic property market and see the UK as a very low risk environment for their hard-earned money.
The UK offers excellent rental yields and there are many city locations with high rental yields, such as Manchester, Birmingham and Liverpool. These tier 1 cities offer an alternative to the very well known London market and in further articles we will showcase the cultural and financial advantages these high yield investment locations. Whilst rental income isn’t necessarily the be-all-end-all for Chinese investors, they may want to rent out their properties while not living there and in general terms, investors can get average yields of 6-8% in the UK as opposed to 2-4% for Chinese residential properties in Shanghai. These returns combined with a weak currency (GBP), only strengthen the case for UK property investing. According to the Hurun Chinese Luxury Consumer Survey 2020, HNWI’s are putting 12.5% of their wealth into overseas assets, and London is ranked as the most popular destination.
Many Chinese investors are purchasing property for the express purpose of housing their children while they study in the UK. Research by Chinese private education company Kai Tak has found that the UK is the number one choice for Chinese students and in November 2020 alone, over 7,000 Chinese students flew into Manchester airport, demonstrating this growing trend Chinese students attending Universities in the northwest cities of England. A report from Savills in 2021 found that there was a 17.1% increase in non-EU students applying for UK universities, with 130,000 applications from mainland China. Chinese students are two times more likely to rent purpose-built student accommodation than UK students. We have purpose built student accommodation buildings available though our property investment portfolio and we will showcase these investments in one of our following investment guides.
If you are a Chinese property investor looking for investment opportunities in the UK housing market and want to purchase property, we are the right choice for you. With a defined and robust buying process in place, access to UK mortgage finance, the UK banking sector and all of the professional services needed to complete your UK property purchase, we believe our service is the most complete and comprehensive available.
Our property portfolio includes newly built residential and student property in London and all of the major UK cities. We have access to properties with buying prices starting at £100,000 with some including rent guarantees and rental yields of up to 8%.