London vs. China
London property development has become a lucrative investment option for investors. According to the Financial Times, the average London house price rose 8.3% over the previous year. Meanwhile, recent DTZ research predicted that London is set to record the highest office rental growth in Europe. Furthermore as Simon Morris previously argued, the emergency summer budget could boost London property development even further.
This cuts a stark contrast with the Chinese stock market; the place where many investors from the People’s Republic choose to invest their capital. The Chinese government decided to devalue the Yuan currency by 2% on 11th August 2015, and its value has fallen ever since. This has had a knock on effect on Chinese stock market, which London Property developers now believe they can turn to their advantage.
Attracting Chinese investors
The Chief executive of the Battersea Power Station Development Company, Rob Tincknell, recently explained the reasoning behind this idea to the South Morning China Post. He said that his firm has “traditionally found that when different markets around the world begin to fluctuate, there is often a direct increase in enquiries” into property developments from investors.
His firm is currently cultivating the Battersea Power Station Property Development; a mix of residential, commercial and retail properties. The project’s first phase only saw a few units snatched up by Chinese investors when it went on sale in 2013. However, the fall of the Yuan has made the Battersea Power Station Development Company believe that it could have more success attracting Chinese investors with its third phase.
He explained, “now we are in phase three, and are really starting to explore and trying to service the need of the people in mainland China.” The chief executive went on to say that “other than Shanghai and Beijing, we are now looking at second-tier (Chinese) cities including Guangzhou, Hangzhou, Shenzhen and Chengdu.”
Chinese prefer buying London properties
Qian Chengri, a sales manager for property consultants Knight Frank, also said that London property developers are keen to attract investors from mainland China. He noted, “more and more Chinese investors prefer buying properties in London for long term investment valuing the rental yield, as well as the appreciation potential.”
Knight Frank held an exhibition in Hong Kong recently for the Keybridge new-build residential property development in Vauxhall, London. Qian noted that the project had attracted some buyers from mainland China. He said that Keybridge and Battersea are more attractive to Chinese investors right now than traditional London luxury residential markets like Mayfair, because they’re looking to spend less to ensure long-term, stable returns.
Simon Morris’ analysis
The fall of the domestic Chinese stock markets has disillusioned many investors who hail from the People’s Republic. They need to find investment options that ensure long-term, stable returns. London property developers are capitalising on the strength of the London residential and commercial property markets to draw Chinese investors.