Real estate sellers are taking notice that the regional cities beyond London are catching the eye of Chinese property investors. Furthermore, other Far Eastern Asian countries such as Malaysia are driving the demand for new investment properties as well.
According to Assetz, a buy to let specialist, what is attracting them are the strength of their currencies when compared to a pound that has been weak of late and the strong yields.
One reason for the interest by Chinese buyers in overseas property investments is because of too much property supply in cities such as Beijing and Shanghai. This overage has caused a 3% drop in gross yields because of reduced rent prices.
The Chinese buyers see that in the UK they can realize rental yields at around 8% which is much more attractive. Furthermore, they can benefit from the weak pound and be set for future growth potential in the sterling’s value. This is facilitated by the fact that they can move US$50,000 out of China each year to be used for investment overseas.
The motivation for overseas investors to seek leads in regional cities is due to the recent cooling of price growth in Central London. Regional cities such as Birmingham, Leeds and Manchester present opportunities for higher yields thus greater income for the overseas property buyer.
The motive for investing in London is low because even though property in Beijing has weak yields the price for housing in the latter city still rises 10% annually. Thus, there is no need to invest in London properties solely for a growth in capital. This is also why Far Eastern property buyers are looking outside of London to the regional cities. The regional cities have greater income potential which is of much more interest to them.
It is also important to note that sterling mortgages are being offered to Chinese investors by the bank of China at 60% to 70% loan to value.
Stuart Law, a chief executive of Assetz, said that the fact that London properties offer Far Eastern investors little promise of significant yield returns is the reason that interest in this city for investment is declining.
He went on to describe how the Far Eastern investors are attracted by the UK’s regional cities because one of the facets of this attraction has to do with the desire of Chinese families to have their children study at British universities. Thus, any development with a focus on young professional tenants is attractive to the Chinese property buyers.