Are Chinese property investors leaving London for Manchester?

Are Chinese property investors leaving London for Manchester?

Summary:

  • Chinese investment into London real estate in the first three months of 2018 dipped to its lowest level for two and a half years
  • £482 million from Hong Kong and China was spent on commercial units in the capital in the first quarter of this year; £7 billion was invested throughout 2017
  • However, Far East interest in Manchester property is growing, with the city described as having “the greatest dynamism and momentum in attracting Chinese buyers”

Buyers in China and Hong Kong are spending less on real estate in London – while demand for property in Manchester is accelerating to levels never seen before.

New figures released by property consultants Cushman and Wakefield has found that Far East investment on London property in the first quarter of 2018 reduced to a level last recorded in 2015.

Just £482 million was spent on commercial real estate in the first three months of the year. In comparison, buyers based in China and Hong Kong invested close to £7 billion into the sector throughout 2017, highlighting a slowdown in investment levels from the region.

For some, ongoing Brexit negotiations, and the impact their outcome will have on the UK’s economy, have seen some buyers take a more cautious approach about moving their wealth to Britain’s primary economic centre.

Another contributing factor has also been the increased difficulty some individuals and companies are currently experiencing moving capital out of China.

However, the slowdown can also be explained by the poor levels of performance investors in London are now seeing. Not only is affordability impacting the decisions of many investors, so too is the reduction in rental growth.

“Rents are slowing off as well. When you compare London fundamentals to other markets, it’s not looking as attractive,” commented Richard Divall, Head of Cross-Border Capital Markets at Colliers International.

However, it’s a different story 200-miles north in Manchester.

Home to one of the country’s fastest-growing populations, huge economic growth and also the highest rental returns from real estate in the UK, interest from Chinese buyers for property in the city has never been higher.

Research from Juwai.com, China’s largest overseas property portal, found in January 2018 that enquiries in Manchester were 255.6% higher over the same period in 2017. In comparison, enquiries in London were down by 48.5%.

With property prices in Manchester city centre as much as £1.4 million more affordable based on average prices in prime central London, in addition to significant tax savings that investors can make, Manchester is proving more attractive to those buyers looking for greater affordability.

This is also coupled with stronger levels of performance; based on current data, investors in Manchester are enjoying rental returns 67% higher than those in London.

“Manchester currently has the greatest dynamism and momentum in attracting Chinese buyers,” said Carrie Law, CEO of Juwai.com. “It has gained buyer share quickly, while London has not.”

Law also added that, despite London remaining popular with wealthier investors, Manchester can increase its market share among Chinese investors. “By finding ways to persuade more Chinese individuals and families that [Manchester] is a great place to start one’s career, to which to immigrate, and in which to retire” Manchester “would likely close the gap with London”.

Find out more about property performance in Manchester by downloading our latest investment guide Manchester: An introduction to the UK’s strongest investment city.

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