Despite the current thawing of relations between Westminster and Beijing, caused by controversial new laws in Hong Kong (a former British colony) and the decision by the UK government to ban Huawei from involvement in the UK’s 5G network, the UK is still a key market for Chinese investment – and that very much includes property.
A new thought leadership paper from UK-China PR agency 11K Consulting, titled ‘Inside the Mind of a Chinese high-net-worth-individual (HNWI): On Investment, Lifestyle, UK, Singapore and Trust’, seeks to explore what wealthy Chinese people are investing in.
China is the world’s second-largest wealth market, with the largest number of people in the top 10% of global wealth distribution, which means that what happens in China has a bearing on everyone else.
It is widely believed that Covid-19 has already caused the largest global recession in history and has had a substantial impact on the global high-net-worth individuals (HNWIs) market. China is currently home to 2.3 million HNWIs (each with no less than $3 million in investable wealth), including almost 26,700 ultra-high-net-worth individuals (with more than $30 million in investable wealth).
But how are these wealthy Chinese people reacting to the coronavirus pandemic? Has it changed their investment portfolios? Are they concerned about an economic slowdown? And do they think that the UK is a good choice for their investments?
To try and shed some light on these difficult to answer questions, 11K Consulting interviewed 13 respected experts in Hong Kong, Singapore, China and the UK to get their thoughts on these topics.
Those interviewed are either Chinese HNWIs themselves, or those who advise Chinese HNWIs on their investment strategies.
What did they say about Chinese investment in the UK?
When it comes to future investment in the UK from Chinese HNWIs, the experts all agreed that the UK remains a top choice in Europe for Chinese HNWIs deciding on where to pursue their investment goals and lifestyle aspirations, even in spite of Brexit and Covid-19.
The number of UK tier-1 investor visa applications by HNWIs from China rose by 32% year-on-year to 202, according to British private equity firm Growthdeck.
Peter Lu, partner at Baker & McKenzie LLP, said that certain economic and political events have caused many Chinese HNWIs to turn their attention to the UK, and this will endure in spite of Covid-19.
“Firstly, the ongoing trade war between the United States and China has discouraged many HNWIs from China investing in the US. This capital is being rerouted to the UK. Second, Brexit has likewise caught the eye of many entrepreneurial HNWI investors, as they are acutely aware that the UK will look to grow its economy once the separation is complete.”
Vicky Tsan, senior associate and licensed conveyancer at Axiom Stone Solicitors, also believes that the UK will remain attractive for real estate investment opportunities in the post-coronavirus world.
“First of all, the exchange rate of GBP is very attractive at the moment. Also, the UK offers the cheapest tax rate among other western countries [such as the} USA [and] Australia.”
“On the other hand, an additional 2% stamp duty land tax to overseas buyers will apply, starting on April 1 2021, if overseas buyers buy property now and the completion takes place after April 2021. This is also the reason for HNWI to purchase properties that complete before this date.”
She added that UK buy-to-let properties offer the best yields compared to properties in other countries. “Clients can usually achieve 6-8%, while the yield in China, especially Shanghai, will be only 2-4%,” she said.
Chris Godfrey, global principal at HBA Residential, said that, in the high-end architectural and interior design world, celebrated Chinese architects and designers often cite London as a place for inspiration and trend-setting.
He thinks that, despite Covid-19 and Brexit, London will always be an attractive world-class city due to its rich history and cultures, while Yat Wan Yeung, a senior client advisor and manager at Henley & Partners, believes that the UK will remain attractive to Chinese HNWIs thanks to its good education, political and regulatory environment.
She said: “Chinese parents are particularly keen on providing their children with a world-class education in a safe environment. They also often wish to obtain permanent residence so there is a lifelong linkage with the country.”
“The UK is also very attractive as an option that permits Chinese HNWIs to globalise and diversify their investment portfolios,” she added. “Real estate and financial products are popular starting points, but plenty are also exploring the possibility of either starting up a new business here in the UK, or starting up an overseas subsidiary.”
Patrick Tsang, chairman at Tsangs Group, believes that no matter what happens – including with Brexit and Covid-19 - the UK will always do well.
“London is the best city in the world. It is close to Europe and its art, culture, sport and education transcends that of America and Asia. In London, you can engage in politics, finance, education, music, culture and not have to go to different cities. London is really the centre of the world, the only place that is truly international.”
He adds: “Having said that, Brexit took too long. Time was lost. Time is money. The UK must also not be complacent. With globalisation, the UK is no longer as much of an influential power as before. Good systems and strategy need to be in place for the coming generations.”
Elsewhere, a luxury London real estate firm has revealed that it has fast-tracked its plans to expand its Asian client division following Boris Johnson’s offer of a path to UK citizenship for Hong Kong citizens.
Montague Real Estate, a Mayfair-based boutique real estate firm and private office, has been growing its Asian client department since the start of 2019 - however, recent political developments in Hong Kong have seen the company’s founder and CEO, Thomas Balashev, accelerate the expansion of the team, which offers a comprehensive range of property and relocation services to high-net-worth Asian clients.
There was a considerable backlash from Western governments earlier this month to China’s implementation of a new national security law, with Prime Minister Johnson recently announcing a route to UK citizenship for 2.6 million of Hong Kong’s eligible citizens.
Given a further 350,000 Hong Kong citizens already hold a British passport, many are expecting an influx of affluent Hong Kongers to the UK over the next year.
“It is important for us to be able to adapt,” Balashev said. “Over 90% of our clients are international - they come from a huge range of backgrounds, each with their own contexts and cultures. We are working hard to be accommodating to every kind of requirement and situation”.
“The last 18 months has seen enquiries from Hong Kong double. We’ve been building up our Asian division over this period, but with recent developments we expect an even higher level of interest.”
As well as sourcing luxury property for high-net-worth clients, Montague Real Estate’s Asian division will aim to provide access to leading lawyers, banks, schools and wealth managers, with every service offered in both Cantonese and Mandarin.
“London isn’t just a desirable place to live – it is a way of life, and our role is to make that transition for those who may be coming from Hong Kong or elsewhere in Asia as easy as possible,” Balashev said.
“Every client has bespoke needs, and with the expansion of our department we are able to offer a full package of relocation services.”