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Prime estate

Updated: 2011-06-17 14:15

By Lu Huaiyuan (China Daily European Weekly)

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The China desk at the Savills has been running for a couple of years now with a young Chinese woman as its head. These London-based agents have also learned a lot about the buying habits and culture of their Asian clients.

"We are aware that they won't buy (house number) 44. The 4th floor, probably they won't get it," says Simon Barry, partner of residential development at Knight Frank. The number four in the Chinese language sounds like the word for death.

Barry managed to sell a flat to a Chinese client at Pan Peninsula, the tallest residential tower in London's financial hub Canary Wharf, at about 750,000 pounds a year ago. Through the deal he also realized Chinese buyers' particular desire to live in a tower with various such as a gym, cinema and swimming pool.

Barry's experience is shared by Seb Warner, partner of international project marketing team for Knight Frank who will soon head the Asian office in Hong Kong to strengthen the company's Asian presence.

Warner says Chinese buyers prefer newly built apartments close to water like the River Thames or Canary Wharf, or a development close to the university where their child is studying.

"The average price of prime apartments we sold to Chinese buyers in central London is about 500,000 to 600,000 pounds and the most expensive apartment we sold to Chinese reached 4 million pounds, which is a newly built 3,400-square-foot (316-square-meter) flat on the top floor in Canary Wharf," Warner says.

He also says Chinese buyers are more superstitious.

"When we showed the Chinese clients around some newly built apartments, you could see them thinking of the combination of numbers. Some Chinese buyers asked to change the door number and this is very common," Warner says.

 Prime estate

From top: The reception room at No 9 Siddons House; the dining area at No 11 Silk House; and the master bedroom at No 9 Siddons House.

Some buyers even want a whole staircase changed because "it is not facing the right way" and some are also not interested in a development near a cemetery or church.

Chinese buyers have also targeted high-end properties in suburban areas. Following the launch of King's Island in Uxbridge of northwest London in March, developer Weston Homes has already sold 31 houses and apartments on the private, gated island estate for 11 million pounds, after two weekend exhibitions in Hong Kong and Macao for international investors.

The Grand Union Canal and River Colne surrounds the area's homes. Prices range from 191,995 pounds to more than 700,000 pounds.

Favorable exchange rate

While the prices of London prime market properties are among the highest in the world, they are still cheaper than before for Chinese buyers, due to the rise of the yuan and the depreciation of the pound after the credit crunch from 2007.

The pound has weakened by almost one-third of its pre-crisis value to the yuan, which translates into Chinese buyers getting a 30 percent discount in property purchases.

Buying a property for their children studying in London is now another key factor why the Chinese super rich are getting more interested in the prime property market. The number of students from the Chinese mainland studying in UK universities has jumped from just over 4,000 in 1999 to more than 47,000 in 2009.

"Chinese parents want their children to live in a building with 24-hour security, so they know there is someone always there every day," Humphery of Harrods Estates says.

Long-term investment

Buying a luxury property in London is also a long-term investment for rich Chinese, with their domestic property market facing a bottleneck from the government's tightening policies to cool sizzling home prices.

Chinese buyers are confident of meeting their expectations of investment in London because of its position as a global financial center as well as its stable property market and considerable capital returns, analysts say.

Chinese investors invest in London's prime property market also because of its free capital gains tax preferential policy - British investors need to pay 28 percent of their capital gain in taxes for property deals.

Local agents are also optimistic of London's prime property market. Although it is still "in the very early stage of economic recovery at the moment", Lucian Cook, director of research at Savills, says "prime property in central London has seen a high level of transactions The comparatively stable London prime property market is definitely a safe haven for cash".

He says Savills expects prices in the prime property market to "go up by 33 percent over the next five years, whereas the mainstream UK market is expected to rise by just 12 percent".

But Cook also says the Chinese super rich are still an "emerging group" in the prime London market, which is still dominated by Russian oligarchs and Middle-Eastern super-rich.

"This market is just like a pool of assets, and the Chinese are a part of the pool," Cook says. "We anticipate they (Chinese buyers) are likely to become an increasing force in the prime central London market. But that requires the developers to tailor their stock to match the demand of those buyers."

Zhang Haizhou contributed to this story.

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