Statistics show that there is a huge amount of Chinese investment in the UK property market, and this is increasing year on year. In just the last ten years, Chinese investors have invested over £50 billion in UK industries. In this article, we will look at some of the main reasons why Chinese investors prefer to invest in UK real estate and the UK economy.
Chinese Influence on the UK Economy
By 2019, over 800 Chinese companies that employ about 71,000 people and have a turnover of £91 billion have set up business in the UK. To gauge an idea of how fast Chinese investors have invested in the UK economy, compare these figures to just one year earlier, in 2018 when the turnover was £68 billion and employed around 62,000 people.
In 2016, Chinese investment in property was about £1 billion. Similarly, in 2017, the investment in commercial real estate property was £3.69 billion, up from £2.69 billion in 2016. The proportion of Chinese investors for properties valued at over £1 million has increased from 3% in 2013 to 13.4% in 2019.
Despite Brexit and Covid-19, property investments and purchases have seen a surge by foreign investors looking to take advantage of the UK’s lucrative property market.
For example, in July of this year, an international property portal registered a 213% increase from investors looking at the UK property market.
As an economic giant, China boasts the highest number of individuals in the top 10% of global wealth distribution and has 2.3 million high-net-worth individuals, plus 26,700 ultra-high-net-worth individuals.
What Do Chinese Property Investors Want?
You may be wondering why Chinese investors favor the UK over other areas like the US, Germany, or France. It cannot be pinned down to one thing, but there are several reasons why Chinese investors choose the UK to pour their money into. In determining some of these factors, we need to understand what motives Chinese investors and their attraction to the UK.
Research has shown what Chinese investors look for when choosing a property. For instance, about 83% of Chinese want to send their children overseas to educate them. Furthermore, about 61% seek high-quality international property investments such as JQ Rise in Birmingham to diversify their portfolio, with about 61% looking for property to live abroad in. Interestingly, 56% of China’s high-net-worth investors have either migrated or have plans to migrate soon. In terms of rental income from property, only 4% invest abroad for the purpose of renting it out, whereas when it comes to the United States, this rises to about 28%.
In summary, we can discern those Chinese investors are looking abroad to educate their children, seek diversification of their portfolio, and, since buy to let is not a major impetus for them, they will likely want to live in the property they purchase abroad. It becomes clear, therefore, that UK properties meet these criteria for investing abroad to a high degree.
As a major incentive to Chinese investors, the UK property sector offers competitive yields, with excellent yields in major cities like Manchester and Liverpool. As mentioned above, with rental income not being a major determinant factor for them, they may still want to rent out their property all the time they are not living there. With an average yield of 6-8% in the UK – London is much lower than the national average – investors can receive rental income much higher than, say, Shanghai where the rental income is more like 2-4%.
Compared to other countries, such as the US, the UK also offers an added incentive for foreign investors with cheaper tax rates. The combination of the COVID-19 pandemic and Brexit, has caused a weaker pound, which adds another attraction to foreign investors.
In addition to favorable economic factors, Chinese investors purchase properties for their children while they are studying in the UK. And it’s worth pointing out that the UK is the first choice for education for Chinese students. Indeed, the UK has seen a 34% increase in overall Chinese student numbers since 2016, with there being more than 120,000 Chinese students currently studying in the UK.
The Chinese Property Market Crises
With the recent financial troubles in the Chinese property market, such as seen with the second-largest property developer in China, Evergrande, indebted to the tune of $305 billion, Chinese property investors are likely more deterred from investing within China’s borders and therefore look abroad for a more safe and stable property market.
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