Why London is a global gateway city

The UK, specifically London, had the most active property market in Europe in the first quarter of 2017 thanks to Brexit. In 2016, before the EU referendum, property sales were only the third most active in Europe but now investors are using the uncertainty of Brexit and the weak value of the pound to bag themselves a great deal.

Investors from emerging markets such as Turkey and Thailand are joining those from established markets in seeing the potential of London property. Asian investors from Hong Kong, China, Japan and Singapore are proving the most proactive buyers in the city. Hong Kong buyers in particular spent almost US$3bn on UK properties in Q1 2017 compared with US$842m in Q1 2016. So why is London proving so popular with this investor group?

One reason could be that the drop in the value of the pound has lead to discounts of as much as 16% for overseas buyers. The currency depreciation is keenly felt for Hong Kong and mainland Chinese investors who are seeing the property prices in their domestic markets rise exponentially. In 2016, Hong Kong received the unenviable title of the world’s most expensive place to buy property. Hong Kong’s average price for a home is HK$4.34m for a 430 sq ft apartment in Kowloon leading the South China Morning Post to note that for the same price you could have an Italian castle, a Sydney apartment with harbour view or a 1,086 sq ft luxury apartment in central Vancouver. It could be why Hong Kong investors have spent nearly US$1.3 bn more than all other foreign groups combined, buying property in London.

London too is a “gateway city”, well connected for global business and global migration of skilled workers. Investors are making a beeline for office investments in the City district and the West End and nearby residential properties for the professionals these will attract. In the wake of the break from Europe, China is viewing the UK as a significant trading partner, investing US$14bn (£10.8bn) here since 2016, according to the American Enterprise Institute and Heritage Foundation. It is also important to note that the 30 best-performing Chinese companies in the UK generated £9.8bn in revenue in 2015 and provided employment for 20,000 people according to research firm Grant Thornton. As Business Insider notes, Britain stands to benefit significantly from China’s interest, especially as it is facing an uncertain future outside Europe.

The UK’s housing market is receiving a boost from the overseas investor interest too. House prices are expected to remain flat through 2018 and then rise by 20% over the next five years. All of which is great news for all investors who are making the most of London’s current low prices and continuing desirability on the world stage.

If you would like to discuss property rental investment yields in London and its sought-after locations, get in touch with the team today.