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Opportunities for Chinese ripe in UK real estate market

Updated: 2011-01-21 10:47

By Zhang Siqi (China Daily European Weekly)

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In China, there has been an upsurge in investments in overseas real estate due to their falling prices and an appreciation of the yuan exchange rate. In the past two years, the overseas real estate market has become an important target of returns for Chinese investors.

The popular overseas markets among Chinese investors include North America, Europe, Australia and Singapore in no particular order.

What now matters for investors is to research trends in

the overseas real estate market to expand on existing investments.

In the next five years, I think more mainland investors will tap into London's real estate market, similar to how like Hong Kong investors marched into London's Canary Wharf 15 years ago. Investors want to invest in emerging development zones with high returns, areas such as London's East End and South East London.

In the past 12 months,

one-fifth of real properties in downtown London were purchased by Chinese investors. These investors enjoyed a 5-8 percent rate of return from rent annually.

Chinese investors began investing a lot of money in the British real estate market from 2008 with a focus on commercial properties and private apartments in London and its surrounding areas.

There is a golden opportunity for Chinese investors in the UK right now.

Every 18 to 20 years, the UK real estate market will cycle through fluctuations of high

and low prices. Housing prices will double every 10 years.

Analysts at rating companies agree that the overall housing market in the UK will remain depressed.

But the supply of houses in London will fall short of demand and housing prices for prime locations will soar from increased demand.

The London real estate market is being spurred by many factors: Supply and demand, and the fact that the British government tightened its supervision over properties, forcing developers to face problems over financing. As a result, the supply of private housing in London is decreasing.

Meanwhile, the UK's increasing population has led to a rising demand for housing. Hosting the 2012 Summer Olympics will stimulate the development of industries and increase employment, which will drive the development of real estate in London upward.

Last but not least are favorable aspects in the UK's real estate market: Low taxes, few limitations in overseas investors and a booming student population from China.

I think investors should not

be hasty to invest if there are good properties with good

prices. Since investments in British real estate are mostly long-term, investors should not wait too long for the lowest price point.

Chinese investors should be more cautious about how investments are conducted in the UK, especially in areas outside London. Many developers outside London are facing high vacancy rates and they will advertise to overseas investors.

Chinese investors who are

not familiar with the real estate market in the UK will be misled with overestimated prices on houses.

I would also like to discuss investments from three factors.

First is location. This is the most important factor that Chinese investors should focus on. When you pick a location, you must pay attention to the micro-environment. Different locations represent different social status and different values.

Second is capital. When the interest rate for a loan reaches its lowest point, you should choose loans instead of using your own funds - you will get maximum gains with the minimum investment.

Profession opinions make up the third factor. Investments in real estate are different from area to area. When you intend to invest in the UK real estate market, you should seek help from professionals.

The author is vice-chairman of the UK-Chinese Real Estate Association.


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