With the world now reopening after the pandemic, many Chinese students are expected to come to the UK in September and October, which will lead to greater demand for UK properties, including in areas around London.
It also said that, when marketing properties in areas around London to buyers from mainland China and Hong Kong, information about rental yields, potential capital growth, tax considerations, and transport links need to be made clear. This is on top of clear pricing information and quality imagery of the properties in question.
Although areas around London are becoming increasingly popular, residential properties in the centre of the city remain sought-after as long-term, safe investments. This is due to the capital continuing to benefit from ‘top-class education, a diverse and liberal cultural scene, and an international business language’.
What was revealed?
With the world beginning to open, mainland Chinese and Hong Kong investors are turning to areas surrounding London, and in particular Watford, in search of growth potential and better lifestyles.
According to the Statista Research Department, the prime property real estate market in outer London is expected to have seen a marked increase in demand during the four-year period between 2021 and 2025. During this period,
Sales in the prime regional real estate market are, during this period, anticipated to rise by 23%, with the highest year-on-year growth expected in 2025 at 5%.
A recent report from Savills found that Watford, which is currently undergoing a £1.5 billion regeneration and is the closest major town to Harry Potter World and Leavesden Studios, has begun to attract a huge of new buyers, including those from China and the rest of Asia.
Situated in Hertfordshire, and offering better value compared to London, homes in the town have seen strong demand from those moving out of the capital, with 30% of people moving from London to the area over the last two years.
For this 11K Consulting Thought Leadership Article, the team spoke to 11 respected experts in Hong Kong, mainland China and the UK, who advise high-net-worth clients from mainland China and Hong Kong on their property investment strategies in the UK, to offer their thoughts on why this trend for outer London is occurring.
A shift to the suburbs?
Locations that would not previously have been considered by buyers from mainland China and Hong Kong, such as Watford, Reading, Surrey and Harrow, have been seeing increased interest since the onset of the pandemic.
That said, London residential property is still viewed long-term as a safe haven asset class, for education, cultural and business reasons.
Jacob Sullivan, sales and marketing director at Regal London, argued that the pandemic has made people reconsider where they want to live, deciding whether they want a quiet, slower life in the countryside, or the bustle and convenience of a city.
He said: “Many are finding an ideal mix of both in locations around the commuter belt, which has seen demand increase significantly among overseas buyers. There is also good value for money in many of these hubs and opportunities for strong capital growth and rental yields, important factors in any investment decision.”
He added: “We’ve also seen Hong Kong and mainland Chinese buyers actively seek out these areas around London, particularly those in the midst of regeneration.
Sullivan pointed out that Watford is generating a lot of buzz at present, with billions being pumped into its regeneration and BID (Business Improvement District) in place, which will allow businesses to raise and distribute funds to improve the local area.
“It is a thriving location, with very quick connections to central London, that is set to attract even more business, retail and leisure amenities and connectivity,” Sullivan concluded.
Samuel Chan Sze Ming, managing director at Britannia StudyLink, had a similar point of view: “Buyers from mainland China usually invest in city-centre locations, such as Shanghai, Beijing, or London. However, after the pandemic, we have seen increased interest in Watford, Reading, and Harrow. More people are looking to relocate overseas [rather than just invest] so buyers are prioritizing factors such as proximity to good schools, meaning a wider net cast for locations.”
Scot Tsang, head of operations and in-house legal at SDKA, believes that mainland Chinese and Hong Kong investors usually favour new-build properties and there has been a lot of development in towns and cities outside of London in recent years.
“Many businesses now have a significant presence outside of London, including the BBC, which has moved around half of its operations to Media City in Manchester,” Tsang said.
“Lower house prices outside of London means more opportunities to invest for more people, and not just HNWI or UHNWI. I would predict this trend to continue in the latter half of 2022.”
Tsang also points out that in areas just outside of London within an easy commute, like Watford, good transport links and regeneration make those areas increasingly popular choices for savvy investors.
Robert Kerr, director at ADAM Architecture, said that as flexible working becomes increasingly standardised, ‘we are seeing increasing numbers of Chinese buyers looking at second-tier British cities that are now booming due to the ability to live further away from their work and travel less often’.
Meanwhile, Steven Landes, director at Hawksford UK Services Limited, says that London prices are still high and so buyers will often look at suburban towns with good transports links surrounding the capital as alternative locations.
“For mainland Chinese and Hong Kong buyers, areas around London are desirable also due to being in easy reach of the major airports that have direct flights to China and Hong Kong,” Landes said.
“Many of these towns have significant new residential developments in their centres. The towns that are favoured include Reading, which is at the end of the new Elizabeth line and close to Heathrow, and Slough, as well as Croydon, which has good transport links and is close to Gatwick.”
However, Andrew Weir, chief executive at London Central Portfolio Limited, set out why the city itself remains popular.
“London residential property is still viewed long-term as a safe haven asset class. London continues to benefit from top-class education, a diverse and liberal cultural scene, and – when compared to other cities around the world – an international business language and the GMT time zone. This all makes London a convenient place from which to run a global business.”
Alex Willcocks, co-founder and managing director at Burbeck Interiors, backed up Weir’s comments.
“Having worked with a number of developers in the Nine Elms area in South London designing the interiors for their luxury apartments, we know that this area has been extremely popular with Chinese buyers,” he explained.
“We have also seen a surge of interest in developments and properties in zones 3-6, where the potential growth in the property’s value over the next 10 years offer greater return on investment.”