Chinese investors' appetite for UK real estate buoyed

Interest from Chinese investors in the United Kingdom's property market has soared recently, after the British government announced it was suspending stamp duty in a bid to boost house prices.

According to Juwai, a leading Chinese real estate portal for overseas property, Chinese buyers made 213 percent more enquiries about British real estate in July than they did a year earlier.

In July, Chancellor of the Exchequer Rishi Sunak announced there would be no stamp duty to pay on property purchases of up to 500,000 pounds ($641,000) until March 31. The change means buyers can save as much as 15,000 pounds on the purchase of a 500,000-pound property.

Georg Chmiel, executive chairman of Juwai IQI, said: "Anyone who can bring their transaction forward to 2020 from next year or even later is doing so. Not only will the holiday expire, but foreign buyer stamp duty rates are set to climb by 2 percent next year."

Chmiel said "a large segment of Chinese buyers" are purchasing property that their children can use while studying in the UK, "even if the actual dates of study might be years away".

"We also see a significant number of investors purchasing build-to-rent property, especially in second-tier cities, like Manchester and Bristol," Chmiel said.

The latest data follows a strong first quarter for Chinese buyer demand with 9.5 percent more enquiries than in the same period in 2019. But the gains were lost in the second quarter with Chinese buyers making 54.1 percent fewer enquiries than a year earlier.

Chmiel said: "Prior to the stamp duty holiday, travel restrictions and pandemic fears were choking Chinese demand. The stamp duty holiday is a positive electric shock that has brought demand back to life."

Mark Hutton, head of residential sales at Battersea Power Station Development Company, echoed that view, saying: "We have seen an increase of about 150 percent in enquiries from Asia over the last few months and the recent introduction of a temporary cut to stamp duty has proved to be a stimulus behind the increased appetite."

Peter Preedy, director of prime central London, residential development and investment at property company JLL, said reduced stamp duty should incentivize investors to push ahead with a purchase before the stamp duty holiday ends next year.

"Of all prime central London transactions, 38 percent are within the 1-million-pound range, and 62 percent are within 2 million pounds, meaning that there is a 0.75-1.5 percent reduction in transaction costs," Preedy said.

He explained that the low value of the pound is another reason why the UK is seeing a rise in the number of Chinese buyers.

"At the moment and over the medium-term, sterling is fundamentally undervalued," Preedy said. "According to Oxford Economics forecasts, the British pound is set to appreciate against the US dollar by 15.2 percent through to 2025, returning to pre-Brexit levels, which means that Chinese investors should be able to capitalize on a currency gain in the coming years."

Realtor noted that Chinese buyers are also attracted to properties in the UK, which present investment opportunities for a significant increase in value and growth.

Hutton said: "Some of our buyers who bought in the first phase, have since reinvested in our second and third phases."

He believes Chinese demand for British property will continue to grow, adding: "The UK benefits from comparative political and economic stability, which lends the region a 'safe haven' status for global investors. A favorable time-zone, London's commanding position as a global financial center, the eclectic and vast cultural scene, and the attractive exchange rate are some of the many reasons why Chinese buyers continue to see value in London's property market."