UK investment – has there been a boom in buyers hailing from Hong Kong?

29 March 2021 | Investment

Before, Hong Kongers had access to British National Overseas (BNO) citizenship – a type of British nationality created in 1985 that people in Hong Kong could apply for before the 1997 handover to China to retain a link with the UK.

It was a lifelong status, but couldn’t be passed down to family members and didn’t give holders any special rights. In addition, it meant they could only visit the UK for six months without a visa.

However, the new system, in place from January 31 2021, allows these BNO citizens and their close family to apply for two periods of five years to live and work in the UK.

After the first five years, they are able to choose to apply for indefinite leave to remain, which means an individual can live and work without reapplying for a visa. Meanwhile, after one year of this status, individuals are able to apply for British citizenship.

What is demand like?

Edward Heaton, founder and managing partner at buying agents Heaton & Partners, commented: “We have seen a 30% uptick in enquiries from Hong Kong in the past few weeks; the majority being from returning expats, but also a handful of wealthy nationals, choosing to leave now as a direct result of the current political disruption.”

He says the expat community typically purchase in towns and villages where they grew up, whereas Chinese buyers have always looked to purpose-built London as their preferred investment. He says it will be interesting to see where Hong Kongers (taking advantage of the new visa route open to them) will be drawn to over the coming months.

“Favourable currency exchange, mixed with political turbulence overseas, has created the perfect blend to make London a very attractive and safe purchasing prospect indeed,” Heaton added.

“The difference between now and previous years is that it’s not just expats from Hong Kong returning to the UK. The proportion of Hong Kong native buyers looking for a proper family home has shot up thanks to the new visa gateway, whereas before if they entered the market many were looking for only investment opportunities.”

In terms of Prime Central London value growth as a direct result of Asian buyers only, Heaton said that is very hard to attach a figure to it, but argued: “If, as predicted, we do see a tidal wave of overseas buyers in the summer when they can once again fly over and actually view London properties, PCL should see an uplift of between 2-3% with this increased demand, particularly from Asia, keeping transactions high.”

He went on: “With Brexit now acting as further reassurance (rather than uncertainty) for global markets that London remains a safe and good place to invest in property, I think the capital will have a bounce back in Q3/4. It has been astonishing how many enquiries we have had from international buyers who foresee very troubling times ahead in the world economy in the next few years and view London property as a real asset. Hong Kong is a great example of this.”

Where do they buy?

“In London, most Hong Kong buyers are focusing on Prime Central London, Kensington and Chelsea in particular, with a few opting to go south of the river for smart family homes with outside space, in locations like Wandsworth, Battersea and Wimbledon,” Heaton stated.

“Traditionally, the overseas market from Asia has always had a focus on London, but this has changed. Our country house market is booming both domestically and with overseas interest. Typical clients from Hong Kong are looking in the Home Counties with budgets ranging from £2 million to £5 million.”

He says, in London, these types of buyers have always had a desire to remain central, ‘very much used to the buzz of urban living with culture on the doorstop’.

Places like Chelsea are well-connected and smart, Heaton added, with period properties offering that ‘quintessential Englishness by the bucketload’. 

“Hong Kong buyers can be likened to domestic buyers in some respects, seeking an address with a certain amount of cache,” Heaton said. “Covent Garden is often asked about too, due to its proximity to LSE, UCL and Kings.”

Why is this important for London’s property market?

Heaton says that last spring, during the height of the first lockdown, prices declined by around 5% overall in central London as worried sellers simply wanted to offload their properties fearing the worst.

“There were a few amazing bargains picked up by savvy buyers at around that time. But as the year progressed and the first lockdown ended, the London market proved remarkably robust with prices starting to creep back up again in the latter half of 2020,” Heaton explained.

“There are definitely fears for what the London market holds in the next year or so, but a significant influx of buyers from Hong Kong may delay any likely correction in prices.”

He said since the new pathway to citizenship was announced, there have been rumours of a growing Asian market in the UK, and he thinks there is every chance ‘this tidal wave of international investment’ will see demand pick up significantly in PCL.

Following a spate of almost reverting back to the 1970s with an astonishingly large domestic market, he says London is on track to having a mini-boom from overseas buyers, as lockdown measures ease across the world.

“I wouldn’t be surprised if, thanks to the return of Asian buyers especially, we see a steady increase in PCL values in the last two quarters of this year,” he concluded.

Cauvery Nanaiah, senior director of global sales & marketing at property investment and management specialists Strawberry Star, is also anticipating a summer frenzy from overseas buyers, with pent-up demand particularly from Asian buyers who have historically seen the UK as one of the world’s safest place to invest in bricks and mortar.

“When overseas travel opens up and in-person viewings can take place once more, I think we will really see the true extent of where Hong Kongers, who are using the new visa route, are choosing to call home,” she said.

“Whereas Chinese buyers tend to buy multiple buy-to-let opportunities from the same development, often by word of mouth, over the years we’ve had Hong Kong buyers making purchases more as their primary or co-primary residences.”

She added: “Overseas buyers will transact in the Hong Kong Dollar and Chinese yuan, seeing much more value for money while the pound is still low. Interestingly now, the focus is moving away from zones 1 and 2, towards regeneration areas with better yields, such as Luton, Harlow and Hounslow.”

Unlike traditional prime markets, she says, these are places identified as having stable growth predictions and attractive yield spread, when compared to other major European and international cities.

“Whether Hong Kong buyers are purchasing for a home or an investment, prospective capital growth will always play its part, as well as ensuring the location is amenity rich, with restaurants and parks and everything in between. Quality of life is much higher on people’s agenda since lockdown, and I don’t see this changing anytime soon.”

Using the stamp duty holiday 

Stuart Leslie, international sales and marketing director at Barratt London, says Hong Kong buyers are currently snapping up London properties in zones 2 to 5, taking advantage of the UK’s stamp duty holiday.

“International homebuyers purchasing their first property in the UK are currently exempt from paying stamp duty land tax on real estate up to the value of £500,000, with savings of up to £15,000 available. The tax break has been extended until at least June, spurring further movement in the market,” he said.

“While prime central property in London remains in high demand, we have seen a significant shift amongst Far Eastern buyers in the past few months, with properties in London’s zones 2-5 proving very popular.”

He added: “With more people than ever working from home, movers expect more from their surroundings, whether that’s extra square footage, additional rooms or access to fantastic facilities and green space in their immediate locality.”

As a result, he says, London suburbs are flourishing, with people willing to move further away from the city centre in search of more space and an improved quality of life.

“With regeneration happening in areas such as Wembley, Hendon and Hayes, we expect prices to rise in the outer zones over the next decade,” he said.

On the return of the overseas student population potentially boosting London’s property market, Leslie said: “Hong Kong property buyers have always been focused on investment purchases with strong rental yield returns, and while this market remains resilient, we expect to see a rise in owner-occupier purchases as the pandemic subsides and we see London become a global city again.”

He concluded: “The foreign student population is another key driver of property sales, particularly one and two-bedroom apartments with good transport links and convenient development facilities comparable to those found in high rise cities such as Hong Kong.”

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