Chinese, Malaysian and other Far Eastern investors are driving demand for new build investment properties in the UK’s regional cities, reports buy to let specialist Assetz, drawn by strong yields and the opportunity to take advantage of a weak sterling.
The property market in Beijing, Shanghai and other leading Chinese cities has overheated in recent years, with a chronic oversupply of property driving rents down with gross yields of just 3%. The Chinese are permitted to move USA$50,000 out of the country each year and many are attracted to the strength of the UK private rental sector where they can benefit from yields in the region of 8%, as well as take advantage of the weak pound and potential future growth in the value of sterling.
Price growth in Central London has cooled in recent months and yields are much lower than those which can be achieved elsewhere in the UK, driving investors to seek higher income opportunities in regional cities such as Manchester and Leeds. Beijing, while offering weak yields, is still delivering annual house price rises in the region of 10%, so there is little motive to invest in London purely for capital growth. In contrast, the regional cities of the UK are offering high income opportunities which are much sought after by Far Eastern investors.
Stuart Law, Chief Executive of Assetz, said:
“Interest in London as an investment destination is moderating a little for Far Eastern investors, offering them kudos and slowing capital growth, but very little in the way of yield return. The higher yields of the UK’s regional cities are a big draw, particularly new developments targeted at young professional tenants. Many investors have children studying at British universities and are keen to put down roots in the country.”
The Bank of China is offering sterling mortgages to Chinese investors, usually at 60 – 70% LTV.