Chinese, Malaysian and other Far Eastern investors are spreading their wings outside the traditional London hotspot and driving demand for new build investment properties across Britain, according to a new report.
Buy-to-let specialist by Assetz.says thxat investors are being captivated by strong yields and the opportunity to take advantage of a weak pound – which has performed badly against Asian currencies since the New Year.
Assetz says that seven years ago, there were near enough zero transactions to Chinese and Far Eastern investors, but they now account for nearly 10 per cent of its investor purchases.
It comes as the property market in Beijing, Shanghai and other leading Chinese cities has ‘overheated’ in recent years, according to the firm. It says a chronic oversupply of property there driving down rents with an average gross yield of just three per cent.
The Chinese, for example, are allowed to move $50,000(US) ($100,000 for a couple) out of the country each year – enough to put down a deposit for a mortgage on a good quality property.
Wealthy Chinese and Far Eastern investors like the stability, democracy and solid land titles that Britain offers, as well as feeling that owning property here carries kudos and offers a prime opportunity to educate their children in the English-speaking world. They are also keen to store some of their riches outside of their homeland.
As a property investment firm, Assetz is obviously keen to publicise its claimed trend. But it backs its figures up by saying it handles around five per cent of all residential investment property purchases in the North and estimates there have been in the region of 2,000 buy-to-let properties sold to Far Eastern investors in the North last year.
Many are attracted to the strength of the UK rental sector. Assetz say investors can benefit from yields in the region of eight per cent.
According to latest Census figures, the proportion of British households renting has increased in the past decade from 31 per cent to 36 per cent. Average monthly rents have risen by roughly 15 per cent, or £100, in just three years.
Why are overseas investors heading out of London
Assetz says Far Eastern investors are seeking higher income opportunities in regional UK cities such as Leeds, Liverpool, Manchester and Sheffield.
These are mainly new-build apartments, which Far Eastern investors have a preference for, and tend to be in far more plentiful supply than in London. They are also much cheaper, making an investment accessible to those lower down the wealth scale.
Typically, Central London has been the prime location to buy property – but Assetz says cooling price growth in recent months and lower yields are making it less attractive.
The Chinese capital, Beijing, is offering weak yields but still delivering annual price rises in the region of 10 per cent – far faster growth than in the UK.
As such, Assetz says that there is little motive for Far Eastern investors to buy property in London for capital growth.
Stuart Law, chief executive of Assetz, says: ‘Interest in London as an investment destination is moderating a little for Far Eastern investors, offering them kudos and slowing capital growth, but very little in the way of a yield return.
‘The higher yields of the UK’s regional cities are a big draw, particularly new developments targeted at young professional tenants. Many investors have children studying at British universities and are keen to put down roots in the country.’
The Bank of China is offering sterling mortgages to Chinese investors, usually at 60-70 per cent Loan-to-Value (LTV).
Source, This Is Money, 2013, Full Article Here