Chinese Investment in UK Property

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    Chinese Investment in UK Property Chinese Investment in UK Property

    In 2015, then Chancellor George Osborne remarked, “no economy in the world is as open to Chinese investment as the UK.” 

    While his words were no doubt designed to impress potential investors, the stats support the fact that Chinese investment in UK property is vast. 

    Chinese investors have sunk around £50 billion into UK industries in the past decade. 

    But why the UK? 

    There are several key reasons why Chinese investors and Chinese property investors flock to the UK and its major cities. 

    In this guide, we will discuss why Chinese investors choose UK real estate, what they look for in the property industry, and why investment in London is decreasing amid the North West’s rise. 

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    Chinese Impact on UK Economy Chinese Impact on UK Economy

    Chinese Impact on UK Economy 

    You may be surprised to learn how much impact China has on the UK economy. 

    In May 2021, a report from The Sunday Times revealed that Chinese investors built a portfolio of UK businesses and property worth almost £135 billion.  

    This has been the case for several years. Back in 2019, there were around 800 Chinese companies in the UK, which employed a whopping 71,000 people. 

    Their revenue was equally colossal, totalling £91 billion. 

    Comparing this to 2018, it’s clear that more and more Chinese investors are choosing the UK for their money. 

    In 2018, Chinese companies in the UK earned a still sizeable £68 billion, but it is substantially less than 2019’s figures. 

    Likewise, in 2018, Chinese companies employed 62,000 people, which is 9,000 less than in 2019. 

    These stats show a consistent growth of Chinese investment in UK areas from Chinese investors. 

    Property Market Activity Increase From Chinese Buyers Property Market Activity Increase From Chinese Buyers

    A Surge in Property Market Activity from Chinese Buyers in 2021 

    Thanks to huge rental yields and low market value house prices in the UK, the property market is a hotbed for international buyers. 

    This is none more so true than with Chinese investors, with Chinese demand in UK property some of the highest in the UK. 

    Back in 2016, Chinese investment in UK property and property purchases totalled around £1 billion, with the total amount invested from Chinese investors in the UK reaching £8.63 billion. 

    This was a year-on-year increase of 12.5%. 

    Similarly, in 2017, £3.69 billion was spent on commercial real estate in London property, which was up from £2.69 billion in the previous year. 

    These numbers are set to continue in the future, with changes implemented by the Chinese government increasing the appeal of overseas investment in the UK property sector. 

    A report from Property Investor in 2021 noted that due to hiking house prices in China, the Chinese government implemented over 300 new regulations to curb levels of investment. This has led to an increased focus on the UK which offers higher rental yields than China.  

    It’s clear that the level of Chinese investment in UK property is on the rise. 

    For residential property, mainland Chinese buyers accounted for 3% of purchases on properties worth over £1 million in 2013. However, in 2019, this was at 13.4%. 

    In fact, in three London areas (Kensington, Chelsea and Westminster) Chinese buyers spent £500 million on residential property in 2019. 

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    Economic Uncertainty Seen as Opportunity Economic Uncertainty Seen as Opportunity

    Economic Uncertainty Seen as Opportunity By Chinese Investors 

    Even Brexit and Covid-19, two colossal events that shocked the UK economy, have not been enough to deter Chinese investment in UK property. 

    In July 2020, the Chinese international property portal recorded a 213% increase in enquiries for UK property. 

    In Q1 2020, found that Chinese buyers made 9.5% more enquiries for British property than the year prior. 

    Experts believe this increase was because many Chinese investors thought Covid-19 would be restricted to just China, and hence wanted to escape the area and identified the UK as a safe haven. 

    However, come Q2 2020, the virus had spread globally, so it was no longer necessary to leave to foreign countries. 

    This resulted in a decrease in enquiries for UK property of 54.1%. 

    But as both countries weathered the storm of Covid-19 and began emerging from lockdown laws and restrictions, interest sky-rocketed. 

    Similar numbers were also seen after the Brexit referendum, when recorded a rise in enquiries, increasing from 30% for UK property to 40% in the four weeks following the referendum. 

    Huge Levels of Cash Investors From China Huge Levels of Cash Investors From China

    Huge Levels of Cash Investors From China 

    While there are plenty of foreign buyers buying property in the UK, there is likely not a greater concentration of rich investors than in China. 

    The country is the second-largest wealth market in the world and has the largest number of people in the top 10% of global wealth distribution. 

    Likewise, it is home to 2.3 million high-net-worth individuals, or HNWI’s, (an individual with no less than $3 million in investable wealth), and 26,700 ultra-high-net-worth-individuals (a person with $30 million in investable wealth). 

    In fact, a report from Property Investor noted that China’s middle class holds £27 trillion in investment assets, with predictions that this will increase to £33.5 trillion by 2025. 

    While China was impacted by the Covid-19 pandemic and was the first to enter Covid-19 measures, it was also the first to leave, and this has led to the economy recovering incredibly well. 

    The BBC reported strong growth in trade for China, while other countries are struggling. 

    China’s exports rose by 9.9% in September 2020, with imports growing by 13.2%. 

    While this increase will eventually level out to more expected numbers, it does show that there is still plenty of money in the wallets of Chinese property investors and explains why the boost in interest for overseas property is so significant. 

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    What Do Chinese Property Investors Look For? What Do Chinese Property Investors Look For?

    What Do Chinese Property Investors Look For? 

    So, why do Chinese property investors choose the UK? Why don’t they select economic powerhouses like the US or other European countries like Germany or France? 

    There are several reasons experts believe Chinese interest in UK areas are so great, and the UK is now considered the ideal location for Chinese property investors. 

    First and foremost, it is crucial to understand precisely what motivates Chinese investment in UK property. 

    Research from outlined exactly what Chinese investors look for in a property. 

    • 83% of Mainland Chinese intend to educate their children overseas 
    • 61% of affluent Chinese buy international real estate for investment diversification 
    • 61% of rich Chinese buy real estate abroad to live in 
    • 37% purchase overseas property as their primary residence 
    • 56% of China’s HNWI’s have either migrated or intend to 
    • 4% of wealthy Chinese invest in international property for rental income 
    • 28% of wealthy Chinese invest in the US for rental income 

    So, what do these statistics show us? 

    These numbers tell us that Chinese investors are looking abroad for education, they want to diversify their property portfolio, and they may want to live in the country they purchase a property from. 

    These numbers highlight precisely why the UK is ideal for investment, as British properties meet all the criteria for foreign investment. 

    Affordability and Student Accommodation Affordability and Student Accommodation

    Affordability and Student Accommodation Key for Chinese Investors 

    The deteriorating relationship between the US and China, with an ongoing trade war, has led to many Chinese investors looking elsewhere to take their money. 

    Despite a contentious relationship emerging between the UK and China (UK banning Huawei from the UK’s 5G networks by 2027), Chinese investors still see British properties as ideal. 

    Firstly, the UK offers excellent rental yields. 

    There are so many top locations to invest in property UK, with sky-high rental yields in cities like Manchester and Liverpool. 

    While rental income isn’t necessarily the be-all-end-all for Chinese investors, they may want to rent out their properties while not living there. 

    Investors can get average yields of 6-8% in the UK as opposed to 2-4% for Chinese residential properties in Shanghai. 

    Not only do they get more bang for their buck in times of a weak pound, but they also know the UK will be looking to grow their economy post-Brexit. 

    With these factors, the number of UK tier-1 investor visa applications by HNWI’s from China has risen by 32% compared to 2019. 

    In fact, according to the Hurun Chinese Luxury Consumer Survey 2020, HNWI’s are putting 12.5% of their wealth into overseas assets, and spectacularly London is ranked as the most popular destination. 

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    Stamp Duty Holiday Led to Increased Buyer Interest Stamp Duty Holiday Led to Increased Buyer Interest

    Stamp Duty Holiday Led to Increased Buyer Interest  

    Another economic factor that has sparked an increase in activity is the Stamp Duty Tax holiday. 

    In the UK, those buying a property pay a Stamp Duty Land Tax. 

    However, in July 2020, it was announced there would be a holiday for this tax. 

    It meant that those buying a second home only need to pay tax on properties with a value of over £500,00. 

    Buy to let investors, on the other hand, will pay 3% tax on a property up to the same amount. On average, it meant that investors could save £4,500, with some able to save up to £15,000. 

    Yet despite the stamp duty holiday ending completely in October 2021 and an additional 2% surcharge on stamp duty for non-UK buyers, buyer interest from foreign sources hasn’t been deterred.  

    UK house prices have increased by over 16% since the start of the pandemic, according to official Land Registry data, far outweighing the impact of the additional surcharge. 

    In fact, many Chinese buyers are avoiding the charge altogether by staying in the UK for a continuous 183 days before making a purchase. Some Chinese buyers buying student accommodation are even using their children’s university attendance to avoid the new charge.  

    Pros and Cons of Student Property Investment Pros and Cons of Student Property Investment
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    Student Accommodation Generating Huge Interest Amongst Chinese Buyers 

    Along with the economic factors, many Chinese investors are purchasing property for the express purpose of housing their children while they study in the UK. 

    Research by Chinese private education company Kai Tak has found that the UK is the number one choice for Chinese students. 

    There are currently over 120,000 Chinese students studying at UK universities, which is a 34% growth in the last five years. 

    In November 2020, over 7,000 Chinese students flew into Manchester for their studies highlighting a very current trend of interest in North West universities. 

    report from Savills in 2021 found that there was a 17.1% increase in non-EU students applying for UK universities, with 130k applications from China.  

    Interestingly for student property investors, Chinese students are 2.2 times more likely to rent purpose-built student accommodation. Check out our student property investment guide to learn more. 

    Since 2014, the number of Chinese student’s at UK universities has grown from 89,540 to 120,385. 

    These numbers have been boosted further after the UK government extended post-study overseas student work visas to two years. 

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    Hong Kong UK Property Investment Set to Increase Hong Kong UK Property Investment Set to Increase

    Hong Kong UK Property Investment Set to Increase 

    It’s not just mainland China investing in the UK, though, as Hong Kong buyers are also emerging and showing interest in the country. 

    The UK government recently launched a special visa offering permanent citizenship after five years for around three million people living in Hong Kong. 

    Under current laws, those holding a BNO (British National Overseas) passport can visit the UK for up to six months without applying for residency visas. 

    However, from January 2021, passport holders from Hong Kong and their immediate dependents can now apply for residency visas with the view to achieving permanent residence. 

    The Financial Times has already reported that the UK is the top overseas market for Hong Kong buyers. 

    With this new influx of potential UK citizens, Hong Kong and Chinese investors will continue to flock to the UK. Hong Kong UK property investment will undoubtedly continue to increase. 

    North West Ideal for a Foreign Buyer North West Ideal for a Foreign Buyer

    North West Ideal for a Foreign Buyer 

    London residential property is traditionally seen as the hub for Chinese investment in UK property; however, in recent years, many investors have started to focus on the North West due to excellent property prices. 

    Liverpool and Manchester are incredibly popular for Chinese students. 

    As mentioned earlier, over 7,000 students flew into Manchester in their studies. 

    Also, one in five students studying at the University of Liverpool is Chinese. 

    A decade ago, the university created a new place of study near Shanghai. Called the Xi’an Jiaotong-Liverpool University, the university runs degree courses that see students visit Liverpool for two years. 

    Overall, the venture is reportedly expected to grow to 30,000 students. 

    This influx of students studying in the North West, along with the incredibly competitive rental yields and property prices Liverpool offers, has seen interest in the area rocket. 

    In 2018, the New Statesman found that enquiries from Chinese buyers for the Manchester property market increased by 225.6% in January compared to the same month the year prior. 

    Chinese investment in Liverpool is also high, with the same report finding a 160% increase in enquiries for the housing market. 

    Consequently, Central London and the wider London area saw a 48.5% drop in residential property enquiries. 

    The North West is a Buy to Let Hotspot The North West is a Buy to Let Hotspot
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    The North West is a Buy to Let Hotspot 

    It seems investment in London is starting to decrease, while trends point to the North West being a buy to let hotspot. 

    It’s clear to see why an overseas buyer, both living domestically and abroad, would consider the North West and the UK property market. 

    The Liverpool property market is home to some of the best performing postcodes for high rental yields, with yields of up to 10%. 

    Likewise, the Manchester housing market is also booming with yields of up to 7.6%, according to The Landlord Link. 

    House prices in the area are also incredibly attractive, with exceptional capital growth predicted over the coming years. 

    Savills recently updated its industry-renowned UK house price forecast. It found that UK house prices in the North West are set to increase by 18.8% by 2026 – the joint-highest growth in the UK. 

    Central London and wider London residential property is no longer the commodity it once was. 

    It seems now is the best time for an overseas buyer to invest in the North West and the UK property market. 

    Overall, the UK housing market is seen as a far more exciting venture for investors than the Chinese residential market. 

    There has been a noticeable increase in Hong Kong and Chinese investors looking towards UK properties, particularly those housed in the North West. 

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    If you are a foreign buyer from China, be sure to check out our investment guides to foreign investment in the UK for more information. 

    Disclaimer: The following guide was updated in December 2021. By the time you read it, the information displayed may no longer be accurate.

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