Asian investors target UK real estate as sterling weakens post-Brexit
By Michael Lim
/ The Edge Property |
As Theresa May triggers Article 50 to start the process of withdrawing from the European Union, the depreciation of the pound has spurred increased investment in the UK from Asia-Pacific and the Middle East, according to JLL.
The depreciation, coupled with the slight drop in capital values, has led UK commercial real estate to be discounted by 16% on average to overseas capital relative to pricing since the June 2016 vote, says JLL.
“Many investors from China and the wider Asia-Pacific region are attracted to the depth, liquidity and familiarity of the UK market and come seeking diversification and safe-haven forms of investment,” says Alistair Meadows, head of UK capital markets at JLL.
The depreciation of the pound has spurred increased investment in the UK from Asia-Pacific and the Middle East, according to JLL.
Source: Bloomberg
Based on JLL forecasts and projections on currency by Oxford Economics, Chinese cross-border purchasers may enjoy returns of 5% to 10% if they invest in London office properties this year, after adjusting for expected currency movements. JLL says Singapore and Hong Kong investors are likely to enjoy a similar rate of returns.
Overall, overseas investors accounted for 48% of transactional activity within the UK market in 2015 and 51% in 2016, owing to currency fluctuations. The number of investors from Asia-Pacific and Europe increased from 2015 to 2016. In 2015, 17% of buyers came from Asia-Pacific and in 2016, the figure rose to 28%. The percentage of European-based investors rose from 14% to 23% in the same period.
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