Even with Brexit leaving many people with questions about the market, Asian investors remain confident in the UK, shows research from JLL. Real estate transaction volumes in the UK reach their highest levels in two years in local currency terms and saw it become the most active real estate market in Europe.
“With the sterling depreciation and slight drop in capital values, Asian investors – particularly private buyers from Hong Kong and China – have been the most active in London since last year’s Brexit vote,” says David Green-Morgan, Head of Research, Global Capital Markets at JLL. “The depreciation and capital values drop means that UK commercial real estate is now discounted by 16 per cent on average to overseas capital since the June 2016 referendum.”
Hong Kong led the way with office buildings in prime locations being the preferred investment. Buyers from Hong Kong spent nearly USD 3 billion on UK properties in the 1st quarter of this year compared to only USD 842 million in the same period last year.
It is not just the UK proving to be popular with Asian buyers who have also been purchasing properties in the US even. The country is dealing with political and economic uncertainties, but this hasn’t caused investors to worry.
“In line with recent trends, Asian buyers were among the most active investors in the US, with investors from Singapore, Japan and China driving most activity,” says Green-Morgan. “Investors from Singapore and Japan acquired offices in New York, Boston and Washington D.C., as they renewed their focus on core assets in global gateway cities.”
The Chinese government has launched several policy designed to stop currency from leaving the country but Chinese outbound capital still increased by 84 per cent in the first quarter. Chinese buyers targeted Hong Kong, Chicago, Los Angeles and San Francisco. In the long term, capital controls are expected to curb outflows from China.
“The new outbound capital control measures are likely to slow down overseas investments, as Chinese corporates and individuals will find it harder to invest outside of China. This is driving an increase in demand for domestic real estate investment going forward. However, for Chinese companies with established overseas presence, the impact could be limited as they can use funds regenerated from overseas branches for investments,” says says Dave Chiou, Director of Capital Markets Research, China at JLL.
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