Chinese investment in London's commercial real estate declines
With capital inflows from mainland China and Hong Kong slowing to a trickle, Chinese investment in central London real estate has fallen to its lowest level in two and a half years. According to data from property consulting firm Cushman & Wakefield, in the first three months of 2018, buyers from Hong Kong and Mainland China bought 432 million pounds of commercial real estate in London-the last time this level of investment appeared was in 2015 year.
Buyers from Mainland China and Hong Kong bought nearly 7 billion pounds of real estate in London last year, including two of London’s most famous skyscrapers, the Leadenhall Building known as the "Cheesegrater" and "Walkie Talkie" (Walkie Talkie) at 20 Fenchurch Street. Bruce Dear, head of London real estate at Eversheds Sutherland, said: "I noticed when I was on a business trip to Hong Kong recently that people are becoming more cautious about the UK market. Their previous excitement has calmed down. , I want to see the situation after Brexit and the performance of the British economy this fall."
The outflow of funds from mainland China is also subject to stricter supervision, and Beijing seeks to cool the wave of Chinese overseas mergers and acquisitions.
In another report on China’s overseas investment, DTZ said that conspicuous acquisitions of British office buildings are among the targets of Chinese regulators. It is expected that the amount of investment from China in 2018 will be reduced by half compared with last year.
Richard Divall, head of cross-border capital markets at Colliers International, said: “China (investors) and some Hong Kong people are now more difficult to transfer funds out. They are not as aggressively bidding as before. If anything happens, we will see some of them sell properties.” He added that investors in Japan, South Korea, and Singapore are still keen to acquire assets in London, but the prices of income-generating real estate remain strong, which gives Buyers bring "challenges." "Rents are also slowing down. When you compare London's fundamentals with other markets, it looks less attractive."
After the Brexit referendum, the exchange rate trend also played a role in promoting Chinese mainland and Hong Kong buyers. At that time, the pound to dollar exchange rate repeatedly fell below 1 pound to 1.20 U.S. dollars, boosting their purchasing power. The pound exchange rate has subsequently rebounded and is now at the level of 1 pound to 1.33 US dollars.
DTZ said that the total investment in commercial real estate in central London fell to 3.8 billion pounds in the first quarter, which was lower than last year's average of 5.3 billion pounds per quarter. Analysts said that the commercial real estate cycle in the UK has passed its peak, but the price of office buildings in London has not fallen significantly.
Data from the data company Real Capital Analytics shows that since June 2016, the price of office buildings in London has risen by 6%. However, the company added that the large transactions in 2017 masked the decline in the number of real estate transactions; only 90 properties were sold in the first three months of 2018, the lowest level in seven years.