The uncertainty which is currently being caused by Britain exiting the EU has had a striking effect on the numbers of Chinese investors making residential acquisitions within the UK, according to the latest statistics.
The research, conducted by the largest international property portal in China, Juwai.com, shows that property buying from Chinese investors has waned recently due to the uncertainty around Brexit, which has increased in the past few months. The quantity of buyers from China purchasing homes in the UK fell during 2018 Q3 to Q4, but statistics have shown that the rate of investment has continued to remain at almost twice that of Q4 in 2017.
Director and chief executive at Juwai.com, Carrie Law, explained that Chinese demand fell in 2018 during the third quarter, moving into the fourth quarter. Ms Law predicts that once the data is analysed, the number of Chinese investors will fall again during 2019 in the first quarter.
She further states that Chinese property investors are still extremely interested in buying property in the UK, but their enthusiasm appears to wane during each quarter. The reality is that Brexit is far more complicated and chaotic than previously expected, which is causing some investors to hold back from making purchases.
Ironically, whilst it is now a more unlikely option after the government recently voted to rule out a no-deal exit, a hard Brexit could create more Chinese investment rather than the softer option of Brexit, which is currently the most likely result. This is because a hard Brexit and clean exit from the European Union would likely lead to a weakening of the British pound.
Carrie Law went on to emphasise that a hard Brexit is designed to allow the UK to set its own path, but the cheap currency could create more property acquisitions by Chinese investors.
Chinese investors are extremely conscious of relative currency movements. The boom in buying by Chinese property investors after the Brexit referendum was primarily driven by a suddenly weak British pound. Currently, a discount of approximately 10 per cent on sterling is already being factored into the assumptions for buyers. Sterling would now have to drop further in value in order to bring new buyers from China into the market.
Despite the continuing uncertainty surrounding Brexit, which looks set to continue even though the EU and UK have reached an agreement for an extension for Brexit until 21st October 2019, most investors from China continue to believe that the long-term potential of the property market in London remains good, according to Ms Law.
She goes on to state that in the past, London has responded well to short-term blows, and has always recovered to its position as a destination for property investment in the premium and middle market sectors, as well as a leading capital city. Brexit may have a short-term impact, but investors expect that the market will right itself soon enough.
The three crucial drivers behind the continued demand from Chinese investors are the UK’s long-term prospects despite Brexit, Britain’s world-class education and the weak pound.
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