International Commercial Investment

Building onwards and upwards – what do investors need to know?

by International Commercial Investment on September 30, 2020

Source: Property Investor Today

With changes to the use class system and permitted development rights now in force, Christina Daniels and Marisia Beard of leading law firm BDB Pitmans outline what this means for landlords and property investors going forward.

As of the August 1, planning applications are no longer required to add up to two additional storeys to homes, commercial and mixed-use buildings; demolish and rebuild unused buildings as homes, and repurpose commercial and retail properties.

Building upwards

The construction of up to two additional storeys is now permitted where the existing house is two or more storeys, or one additional storey where the existing dwellinghouse consists of only one storey. The changes also enable the construction of up to two additional storeys of dwellinghouseimmediately above a building within Class A1 (shops), A2 (financial and professional services), A3 (restaurants and cafes); B1(a) (offices), betting office, payday loan shop or launderette; or mixed-use buildings combining two or more uses above or C3 (dwellinghouses) and one of the uses above. For terraces, where the existing building consists of one storey, only one additional storey is permitted.

The permitted development rights (PDR) include engineering operations, such as strengthening existing walls and foundations or installing services. as is reasonably necessary to construct the additional storeys, provide safe access and egress, and storage, waste or other ancillary facilities reasonably necessary to support the new dwellinghouses.

  • What are the restrictions?

The new rights donot apply to dwellinghouses converted to residential using PDR, those constructed before 1 July 1948 or after 28 October 2018 or where the existing house has already been enlarged by the addition of one or more storeys – whether under permitted development or otherwise.

Likewise, they do not apply to commercial/mixed-use buildings less than three storeys in height above ground level, constructed before 1 July 1948 or after 5 March 2018, in a use or mixed-use other than those listed above, or a use falling within Class C3 on 5 March 2018.

Other restrictions include the introduction of maximum roof heights relating to additional storeys on dwellinghouses and the internal floor to ceiling height of additional storeys which cannot be more than the lower of 3m and the existing height of any storeys in the main part of the existing house/building. The new storeys must only be constructed on the main part of the building, excluding any extensions which are lower. There cannot be any visible support structures on or attached to the exterior – and materials used in exterior works must be of similar appearance to the existing building. Any new dwellinghouses built above commercial uses must also be flats.

  • What about prior approval?

Despite the changes, there are situations in which the developer must still apply to the local planning authority (LPA) for prior approval.

This might include where there are predicted impacts upon transport and highways, air traffic and defence assets, and the ability to construct safe access and egress, and storage, waste or other ancillary facilities. Consideration must also be given to the impact on the amenity of the existing buildings and neighbouring properties – as well as adjustments to the external appearance of the building. Developers are also responsible for considering the impact of noise from the commercial premises on the new dwellinghousesRisks, such as those of contamination and flooding, must be assessed.

Demolishing vacant buildings

Planning permission is no longer required to demolish and rebuild vacant residential and commercial buildings if they are rebuilt as homes. This applies to vacant buildings that fell within use class B1 or free-standing purpose-built residential blocks of flats (C3) on 12 March 2020. The demolished building can be replaced by either a single detached dwellinghouse or a purpose-built block of flats.

  • What are the restrictions?

The building must have been built before 1 January 1990, have a footprint of 1,000sqm or less and been vacant for at least 6 months prior to applying for prior approval. The redevelopment must be a single new building within the footprint of the existing building, with a maximum footprint of 1,000sqm and maximum height of 18m. Note that this does not apply to listed buildings or scheduled monuments, or land within their curtilage.

Furthermore, land cannot be occupied under an agricultural tenancy, unless express consent is given from the landlord and tenant. This also does not apply to the demolition of part of a building or allow the demolition of more than one building within the curtilage and the incorporation of any additional footprint.

  • What about prior approval?

Prior approval is also needed in respect to the transport and highway impacts, contamination and flood risk, impact of noise from other premises on the future residents. design and external appearance of the building, adequacy of natural light in all habitable rooms, impact of introducing residential use into an area and the impact on the amenity of the new building and of neighbouring premises.

The developer must also provide drawings showing dimensions of the old and new buildings, detailed floor plans, a construction management plan and a heritage and archaeology statement.

Repurposing High Streets

Changes have been introduced to the Use Classes Order to allow for a mix of retail, business and leisure uses to reflect the changing landscape of the high street whilst protecting community assets.

This includes the introduction of Class E – a new town centre use enabling buildings to change use from uses previously falling within Classes A1, A2, A3, B1, D1 and D2, or a mix of these uses, without applying for planning permission.  These changes also apply to office and retail parks. Classes F1 and F2 group community assets such as schools, libraries, swimming pools and local shops. Interestingly, pubs, wine bars, takeaways, cinemas, bingo halls and concert and dance halls are now included as sui generis, meaning that planning permission is required to secure a change of use.

A1, A2, A3 and B1 assets automatically fall within Class E from 1 September 2020, which will give developers much more flexibility. However, buildings will need to be brought into a use permitted under an existing permission (if not being used or occupied as such) before changing to another Class E use. Planning applications submitted prior to 1 September 2020, will be determined in accordance with the use classes in effect at the time of submission. It is also important to remember that there may be restrictions on the use which limit the application of Class E contained in leases or planning conditions and that changes to permitted development rights will not follow until 31 July 2021.

The changes remove some of the formalities surrounding planning applications, providing developers with welcome flexibility to redevelop otherwise unused properties, provide much-needed housing and utilise sites more effectively. On the other hand, those with newly sui generis uses will have less flexibility and be subject to LPA control. Landlords and investors will need to be alive to these changes when looking at leases and planning conditions to see the extent to which a use is authorised. 

It is important to check local designations and that LPAs have not restricted the use of the new PDR through Article 4 Directions. However, the changes to the Use Class Order currently hinge on the outcome of a judicial review, with a challenge expected to be heard in mid-October. 

*Christina Daniels, planning partner and Marisia Beard, associate at BDB Pitmans

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International Commercial InvestmentBuilding onwards and upwards – what do investors need to know?

INSIGHT: U.K. Property Investment for Nonresidents in the Age of Covid

by International Commercial Investment on August 20, 2020

Source: Bloomberg Tax

The U.K. government has introduced a tax holiday for buyers as one of its measures to stimulate the property market. Alpa Bhakta of Butterfield Mortgages Limited takes us through the detail and looks at the potential tax issues for foreign investors in the U.K. property market.

While we seem to have passed the peak of Covid-19 cases in the U.K., there are still immense challenges facing the country as it begins its post-pandemic recovery. Market volatility is rife; and there are still unanswered questions regarding the U.K. economy’s ability to recuperate and recover the losses incurred.

For the moment, the U.K. government has been actively encouraging a return to relative normality through targeted reforms and policies that support businesses, investors and consumers. These measures are by no means permanent, but rather, their aim is to reinstate confidence and put the wheels of the economy back into motion.

One of the more pronounced steps taken has been the introduction of a Stamp Duty Land Tax (SDLT) holiday; something I have commented extensively on throughout the year.

The SDLT holiday has been in place in England and Northern Ireland since the Chancellor Rishi Sunak announced his mini-budget on July 8, 2020. By increasing the minimal threshold of SDLT to 500,000 pounds ($654,500) for property sales until March 31, 2021, buyers could be exempt from paying as much as 15,000 pounds on their next purchase.

The aim of the tax relief is simple—to encourage buyers to return to the property market. In turn, this will boost the number of transactions taking place and contribute to the positive growth of house prices. So far, it has been having the desired effect. Nationwide’s House Price Index for July noted that annual house prices had grown by 1.5%. What’s more, prices were up 1.7% month-on-month.

This is welcome news for the Chancellor, but my advice is to not to become complacent. Ensuring that house prices will continue to steadily increase over the next few months is key.

Foreign Capital is Vital to the U.K.’s Property Recovery

The SDLT holiday applies to all transactions, including purchases being made by non-U.K. residents. The government clearly wants to encourage capital injections from domestic and international sources, and so far, this holiday has been well received.

U.K. real estate is an attractive asset for international buyers, particularly when we look at the top end of the market. For example, in 2019 alone, non-U.K. residents were responsible for over half (55%) of all prime central London (PCL) property transactions. Its historical resilience and rate of capital growth over long-term periods ensures consistent market demand for bricks and mortar in London.

Covid-19 has not dampened this demand, particularly when it comes to buyers based in Hong Kong, mainland China, and Singapore. According to Beauchamp Estates, the amount of Hong Kong and mainland Chinese investment it handled into PCL property between December 2019 and June 2020 totaled $374 million. It also found that this group of buyers accounted for 20% of deals above 10 million pounds in the capital.

On top of this, the political situation in Hong Kong is compelling investors in the jurisdiction to consider stable markets with assets that can deliver modest capital growth in the medium- to long-term. The PCL property market is a popular destination, and based on the conversations we’ve been having, there is good reason to expect an influx of investment from these investors over the coming months.

In light of this, it is important for non-U.K. residents to be fully aware of the different tax issues they could face when investing in property.

What Tax Issues do Non-U.K. Residents Need to be Aware of?

The tax framework governing the U.K. property market has undergone significant changes in recent years. While still encouraging foreign investment into residential and commercial real estate, the changes have meant that nonresident owners of property are now subject to more rules and regulations. This is particularly true when it comes to managing a property that is generating income, such as a buy-to-let investment.

To better understand the taxation regime, it is helpful to understand the taxes that apply when buying and selling property in the U.K.

When Buying a Property…

SDLT is applicable to all property transactions involving non-U.K. residents. While it is initially calculated in bands based on the value of the property, international buyers are also subject to a surcharge. This surcharge applies to all transactions whereby the buyer is purchasing a property in addition to their primary residence, be it a buy-to-let investment or a secondary residence. Again, this surcharge is calculated based on the value of the property.

In light of the current circumstances, non-U.K. residents are exempt from paying SDLT on the first 500,000 pounds on all property sales. However, the surcharge still applies during this holiday period. What’s more, the government will be introducing a further SDLT surcharge of 2% that will be applicable to all non-U.K. buyers in April 2021. This was initially announced in the 2020 Spring Budget and it is not yet known whether this surcharge will come into force next year as planned, or be delayed as a means of encouraging further foreign investment into British real estate.

When Selling a Property…

Capital gains tax (CGT) is paid by the seller once the transaction has been completed. In 2015, it became mandatory for all non-U.K. residents to pay CGT. Prior to this, international sellers were exempt from paying the tax if they had been classed as a non-U.K. resident for five consecutive years. The tax is calculated by subtracting the sale value from the original purchase value. At the moment, CGT is charged at the rate of 28% when the total taxable gains and income are above the income tax basic rate band. If this is not the case, the rate drops to 18%.

CGT is important to understand for those international buyers who are leveraging U.K. property for short- and medium-term gains. What’s more, significant changes to CGT could be on the horizon. Chancellor Rishi Sunak has ordered a review of the tax which could result in the introduction of sweeping reforms in the 2020 Autumn Budget. Based on the economic impact of Covid-19, such a review could lead to an increase in the CGT rate.

Aside from the taxes linked to the buying and selling of real estate, international investors also need to be aware of the tax that they are liable to pay when owning a property. The nonresident landlord scheme applies to those landlords who live abroad for more than six months a year: even if they are a primary resident in another tax jurisdiction, they are still required to pay tax to the U.K. government in the first instance. A tax credit can then be used in their home country to ensure they are not double-taxed. Of course, this process is managed on a case-by-case basis depending on the legislation that is currently in place between the U.K. and the nonresident landlord’s home country.

Taking Advantage of Property Investment

The SDLT holiday will no doubt encourage an influx of capital from volatile markets into U.K. real estate. For those planning to diversify their portfolios and take advantage of the bricks-and-mortar discounts in the coming months, it is necessary to understand the different taxes that currently apply to international investors.

The tax framework governing property purchases in the U.K. can be complex and overwhelming at times. At the same time, it could be subject to wide-sweeping changes as the government considers ways of stimulating investment and raising revenue in response to Covid-19. Such potential adjustments are understandable given the economic severity of the coronavirus pandemic. In any event, it will be advisable to consult with a wealth adviser or financial professional when considering investing in U.K. property.

Alpa Bhakta is the CEO of Butterfield Mortgages Limited, part of the Butterfield Group and a subsidiary of The Bank of N.T. Butterfield & Son Limited.

The author can be contacted at: alpa.bhakta@butterfieldgroup.com

The opinions expressed in this article are those of the author and do not necessarily reflect those of Butterfield Mortgages Limited or the wider Butterfield Group.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

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International Commercial InvestmentINSIGHT: U.K. Property Investment for Nonresidents in the Age of Covid

UK inward investment projects increase in 2019

by International Commercial Investment on July 10, 2020

Source: Gov.uk

Department for International Trade (DIT) statistics showing the number of foreign direct investment (FDI) projects in the UK for the financial year 2019/2020.

Figures from the Department for International Trade published today (10 July), show the UK attracted 1,852 new inward investment projects in 2019/2020 financial year, representing a 4% increase on the previous year.

Today’s figures show the US continues to be the number one source of foreign direct investment in the UK, delivering 462 projects and 20,131 jobs, while India is now the UK’s second largest source of investment followed by Germany, France and China and Hong Kong. Australia and New Zealand were responsible for 72 projects and the Nordic and Baltic region 134, an increase for both regions.

England, Wales and Northern Ireland, all saw an increase in the number of projects each nation attracted, whilst Scotland saw a decline on the number of projects from the previous year.

While the number of new jobs as a direct result of foreign investment has declined – a global trend as seen in other FDI reports this year – the number of UK jobs safeguarded by FDI increased by 29%. DIT worked closely with existing investors to safeguard 26% more jobs compared to 2018 to 2019, demonstrating the broad range of support DIT delivers for the UK economy by promoting investment.

International Trade Secretary, Liz Truss said:

These figures further demonstrate the resilience of the UK economy and the work of the Government to continue to build and attract inward investment into the UK. Future trade agreements will deepen our economic relationship with key sources of investment such as the US, Japan, Australia and New Zealand.

There is still work to be done in our levelling up agenda, to ensure all regions of the United Kingdom reap the benefits of inward investment, increasing jobs and prosperity across the nations, and these free trade agreements will contribute to this.

Developing key sectors such as advanced manufacturing, life sciences and renewable energy will help us to rebound post-pandemic and build on our attractive business environment across the UK for investors around the globe.

This year, DIT’s statistics also include the Cambridge and Oxford Arc, a priority area for government, while the GREAT Investors Program data has also been included showcasing the strengthening of growth capital investment in the UK.

Background

See Inward Investment Results for 2019 to 2020.

The Financial Times FDI Report 2020

  • The Financial Times FDI Report 2020 highlights that the UK remains top in Europe on attracting FDI projects and on greenfield capital expenditure.

EY Attractiveness Survey 2020

  • The latest attractiveness report by EY shows that the UK lost its top spot to France as most attractive destination in Europe for foreign direct investment, however remains one of the most attractive destinations for investment in Europe with over 1,100 inbound investment projects in 2019, more than Germany and Italy combined; an increase of 5% despite a challenging global climate.

UNCTAD World Investment Report 2019

  • The latest data by UNCTAD showed that by the end of 2019, the total value of the UK’s inwards investment stock was $2.1tn, the highest in Europe and second highest in the world. The value of the UK’s inwards stock was also worth more than Germany and France combined.

ONS

  • ONS’s latest National Statistics (to the end of 2018) show the inward FDI stock is at the highest level recorded (£1.521 trillion).

Forbes ‘best countries for business’ 2019

  • The UK was found to be the top country for doing business in Forbes’ 2019 report, a measure which ranks countries according to how business friendly they are based on 15 different factors from property rights to investor protection.

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International Commercial InvestmentUK inward investment projects increase in 2019

Why is nine months the magic number for UK housing market recovery?

by International Commercial Investment on June 3, 2020

Source: Buy Association

As estate agents, valuers, surveyors and more return to work, the housing market is reviving. The latest predictions have given a timeframe for the sector’s full recovery…

The cogs of the UK housing market began turning again last week as the government set out its new rules. This meant house moves could get back underway, while people hoping to buy or sell now have more options to do so. People can view properties, lenders can have them valued and surveyors can visit homes again.

The reopening is of course subject to a number of guidelines. People must still practise social distancing and additional hygiene measures. For estate agents, letting agents and similar businesses going back to the office, several rules now apply to ensure everyone’s safety.

This activity had largely not “stopped” during the coronavirus outbreak, though. Many agents were working from home, while property viewings were happening virtually. Many lenders were also carrying out “desktop valuations”, and people could still apply for mortgages online. As more people have adapted to using more technology and digital options, the industry has found ways to continue.

Steady improvement

While the easing of lockdown on the housing market is good news, it will be a gradual process. The Royal Institute for Chartered Surveyors (Rics) argues that the industry would benefit from a stamp duty holiday to give it a further boost.

In its latest residential market survey, Rics revealed its predictions for recovery. Contributors to the survey said that they expected property sales to “rebound to their previous levels in around nine months”, when looking at the mean average. For the median average, the expectation was closer to six months.

The survey also broached the topic of a stamp duty break. While around 80% of respondents said they had seen some buyers or sellers pulling out because of coronavirus, 62% said such a tax break could help the market. This would in effect encourage buyers and sellers while leaving house prices unaffected.

The figure of nine months was taken before the government eased lockdown restrictions for the housing market. Therefore, as former Rics residential chairman Jeremy Leaf points out, the next survey “is likely to be quite different”.

Nine months for the mortgage market

Between 8th April and 3rd May, 467 UK mortgage brokers were asked about their recovery expectations for the sector in the Mortgage Lender Benchmark study. Like in the Rics survey, respondents came up with the ‘magic number nine’ as the number of months until recovery.

Around 77% of brokers are confident lending levels will return to pre-COVID-19 levels within nine months. A more optimistic 51% said this could happen within six months.

While initially the mortgage market retracted many of its products back in March, it relaunched new ones relatively quickly. Many lenders reduced LTVs because of the difficulty of carrying out valuations. However, product numbers have been creeping back up and people have been progressing with their mortgage applications behind the scenes.

Anthony Rose, director at LDNfinance, said: “Mortgage lenders, on the whole, have responded really well to events and maintained their willingness to lend as much as could have been hoped for.

There have been similarities drawn between the current situation and the financial crisis of 2008/2009. However, Rose believes the situation is very different.

“Mortgage lenders themselves seem in a much better position to lead the recovery in the housing market,” he added.

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International Commercial InvestmentWhy is nine months the magic number for UK housing market recovery?

UK Economy Is Picking Up After Brexit

by International Commercial Investment on March 2, 2020

Source: Bloomberg

The UK economy extended a run of better-than-expected growth in February, more evidence of a rebound after fourth-quarter stagnation.

While the expansion continued apace, there were also signs of a hit to supply chains from coronavirus, according to IHS Markit’s flash purchasing managers index.

The virus’s outbreak weighed on manufacturers’ input stocks, which fell at the fastest pace in more than seven years. Some orders from clients in Asia were canceled and extended shutdowns in China proved a headwind.

Nevertheless, manufacturing output grew the fastest in 10 months, offsetting a small downward move in services. Growth expectations in the private sector edged up slightly, the report showed.

The pound held gains after the report and traded at $1.2922 as of 9:31 a.m. in London.

“The recent return to growth signaled by the manufacturing and services PMIs provides a clear indication that the U.K. economy is no longer flat on its back,” said Tim Moore, an economist at IHS Markit. The expansion is running at a 0.2% pace in the first quarter, he said.

Firms noted that a reduction in political uncertainty since the December election, when Boris Johnson’s victory gave a clear path to Brexit, translated into higher business activity and more spending by clients.

This and other reports support the case for the Bank of England to refrain from cutting interest rates soon. Figures this week showed the labor market remains tight and consumer spending is picking up.

IHS Markit’s index for output across the whole economy was unchanged at 53.3 in February, a better reading than the 52.8 forecast by economists and well above the critical 50-mark that separates expansion from contraction.

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International Commercial InvestmentUK Economy Is Picking Up After Brexit

UK economy rebounds as services sector hits 16-month high

by International Commercial Investment on February 6, 2020

Source: The Guardian

Britain’s economy rebounded in January as fading political uncertainty since Boris Johnson’s election victory helped service sector companies record the strongest upturn in activity since mid-2018.

The services sector – which includes banking, insurance, restaurants and hotels – makes up about 80% of the economy. According to the latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply, business activity grew for the first time since August.

Powered by a rise in domestic activity as exports remained muted, service firms reported that greater clarity over the political outlook had bolstered consumer spending and business investment across the country.

The IHS Markit/Cips purchasing managers index (PMI) for the sector rose to 53.9 last month, the highest since September 2018. The reading was slightly above initial estimates of 52.9, on a scale where a reading below 50 signals contraction.

Staff hiring increased, while the prospect of faster political decision-making led to an upturn in companies’ willingness to spend, according to the PMI survey.

Tim Moore, an economics associate director at IHS Markit, said the PMI readings indicated that GDP would rise by about 0.2% in the first quarter of the year – a marked turnaround from the end of 2019 when growth, in effect, stalled.

“Signs of greater willingness to spend and renewed positivity about the domestic economic outlook has helped lift service providers’ growth projections to the highest for just under five years,” he said.

Despite the rise in optimism, economists cautioned that the survey of about 650 service sector companies was conducted before the coronavirus outbreak hit business activity in China. Analysts have warned that quarantine efforts in the country could drag down growth in the world’s second largest economy, with spillover effects for other countries.

The PMI also showed that orders for UK service sector companies from the EU remained sluggish as continuing Brexit uncertainty dented demand in January.

Although early snapshots indicate a bounce for the economy since the Conservatives’ unexpectedly decisive election victory, analysts warn that the complexity of Brexit negotiations could increase political uncertainty again towards the end of the year.

Johnson has promised that Britain will come out of the Brexit transition period, which maintains free trade with the EU until the end of December, with or without a comprehensive new trade agreement with Brussels.

Chris Sood-Nicholls, the head of professional services at Lloyds Bank, said: “The mood among firms is currently one of cautious optimism as the pipeline of work put on ice in 2019 begins to flow again. However, many are acutely aware of the reality that we are not out of the woods yet.”

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International Commercial InvestmentUK economy rebounds as services sector hits 16-month high

Hongkongers turn to Brexit Britain as a haven

by International Commercial Investment on December 5, 2019

Source: Financial Times

The market for newly built luxury homes in London has been in the doldrums for almost five years, battered by oversupply, tax changes and worries over Brexit. Now, though, it has received a boost from a territory whose political troubles have eclipsed even the UK’s: Hong Kong.

Residents of the semi-autonomous Chinese city have been buying up London homes, while in the commercial property sector purchasers are eyeing big deals, according to analysts and estate agents.

The turmoil in the former UK colony stemming from anti-government protests has revived longstanding links with London and made Brexit appear comparatively unthreatening, propelling a fresh wave of buyers westwards.

“We are seeing masses of [Hongkongers] again,” says Steven Herd, chief executive of MyLondonHome, an estate agent. “What is going on in Hong Kong is driving people to look for a safe haven. It is partly about wealthy families making sure they have property elsewhere that is suitable for them to move into at short notice, and partly about them wishing to get their funds out of a volatile region.”

The number of Hong Kong buyers in London has increased in the past three to four months, many of them seeking homes in the £1m-£2.5m price range, says Herd. The weakness of sterling and falling luxury property prices have added to London’s allure, he says.

“Undoubtedly they have helped to underpin the market and stop it sliding.” Hongkongers tend to prefer new properties. Molior, a company that monitors property developments in London, says 5,156 new homes in the capital were sold in the third quarter of 2019, the highest figure in a year and a half. About a fifth of these went to overseas purchasers, many of whom were from Hong Kong and China. “It is [homes] at the [upmarket] £1,000-£1,200 per square foot level, which haven’t sold well for several years,” says Tim Craine, a director at Molior.

He adds that, despite worries about Brexit, the trend taps into London’s reputation as a haven for wealth from unstable parts of the world. “It is the flight to safety,” he says. “A decade ago it was buyers from around the Mediterranean as the Arab Spring took place, then maybe four to five years ago it was Saudi Arabia. The tide has come in at this particular time because of the trouble in Hong Kong.” By way of illustration, about one in 10 homes sold so far in a new housing scheme by developer Ballymore in Brentford, west London, has gone to a Hong Kong buyer, the company says.

Buyers from Hong Kong are able to defy a broad drop in outbound capital from mainland China, partly because the mainland’s tighter capital controls do not apply in the territory. But more political certainty in the UK would cement the trend, agents say.

There are uncertainties in the US or China and difficulties in the UK, but it is more stable Ronald Sin, Cheung & Sons The “flailing” of sterling “is definitely a contributing factor”, says one British national who grew up in Hong Kong and is considering a purchase in the UK. “I have been considering it for about a year now, but I have put a hold on the process as I think prices will continue to drop [in the UK]. I just have a total lack of confidence in how the government is handling Brexit, so I feel like I have time,” she says. Estate agents note that for Hongkongers, London is not purely an investment destination but also a place to live, full or part-time.

The city has a thriving community from the territory, including the children of wealthy and middle-class Asians at London’s highly rated schools and universities. Caspar Harvard-Walls, a London-based buying agent with Black Brick, has been meeting prospective clients in Asia.

“Some potential [Hong Kong Chinese] clients have raised concerns about their children becoming caught up in the protests and see the appeal of sending them overseas for their secondary or higher education. They are looking for accompanying accommodation,” he says.

Harvard-Walls uses the discount on prime London houses compared with the market peak in 2014 in his pitch — that is, a 34.4 per cent reduction in Hong Kong dollar terms from five years ago, thanks to the depreciation of sterling and the fall in house prices from that peak.

The inflow of capital has been less pronounced in commercial property, where London transaction levels have been dwindling because of Brexit worries — not least because sellers fear exposing properties to an uncertain market.

A run of big purchases by Hong Kong and Chinese buyers two years ago — including landmark skyscrapers in London’s financial district such as the Leadenhall Building (the “Cheesegrater”) and 20 Fenchurch Street (the “Walkie Talkie”) — has been followed by a quieter market. In August, however, CK Asset Holdings — the company founded by Li Ka-shing, Hong Kong’s richest man — bought UK pubs and brewery group Greene King in a £4.6bn deal.

The brewer’s £3.5bn freehold property portfolio was most likely one of the attractions. This followed a failed bid in 2018 for a portfolio of railway-arch properties ultimately sold for £1.5bn. CK Asset is now run by Li’s son Victor Li, but its activities are still followed closely by other Hong Kong investors, says one Chinese lawyer operating in London.

“Where Li Ka-shing moves, others follow,” he says. New entrants from Hong Kong are arriving in the UK commercial property market. In September, a first-time Hong Kong buyer, a client of investment company Goldstone Commercial, bought the Forum St Paul’s office building in the City of London for £80m.

“[Investors] see Brexit as possibly reaching its endgame, and it is all outweighed by the fact that the rioting [in Hong Kong] is pretty horrendous,” says Nick Braybrook, a partner at estate agent Knight Frank in London who advised the buyer. He says people in the UK “don’t register how emotive it is — it’s splitting companies in half, families in half”.

In another City of London deal, Cheung & Sons, a Hong Kong-based property developer, in June bought the freehold of 28-30 Cornhill, a 1930s-built office building near the Bank of England, for £32m. “Buying property in London is quite attractive at this moment,” says Ronald Sin, a senior associate at Cheung & Sons.

“Many wealthy people from Hong Kong or in Asia are looking at the market in London. In China or the US, there are many uncertainties. There are also difficulties in the UK, but it is more stable,” he says. In July, a joint venture fronted by Hong Kong-listed Wing Tai Properties — which owns at least two other central London properties — agreed to purchase 8 Salisbury Square, a 155,000 square foot office building near St Paul’s Cathedral, for £222m, according to estate agent Savills.

Interest in London’s office sector is strong, says Antonio Wu, deputy managing director at estate agent Colliers International in Hong Kong. He says for investors, offices will be the “most interesting sector by far”, adding that “occupancy is still very strong and very healthy”.

Many of the big Hong Kong property groups are also looking at other types of investments in the UK, according to a London-based property lawyer. “There is strong interest, but not this time as a pure real estate play,” he says. At the same time, investors are looking at technology, fashion, leisure and green energy, he adds, but are “nervous” about the possible election of a Labour government led by the leftwing Jeremy Corbyn. “Let’s face it, these investors are some of the most neoliberal people in the world,” he says.

Elsewhere in the world, Hong Kong homebuyers have strong links with Vancouver, New York and Sydney, while commercial buyers have been increasingly active in Singapore and the US, according to data from Cushman & Wakefield, a property services company. Savills’ residential division notes a steep rise in enquiries from Hongkongers — from 1,045 in the whole of 2018 to 1,620 so far this year — in most cases, about UK homes.

But not all have resulted in purchases. Mark Elliott, head of international residential at Savills in Hong Kong, says many enquiries have come from “people who watch the news at night, get a little bit scared and pick up the phone, but you don’t hear from them again”.

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International Commercial InvestmentHongkongers turn to Brexit Britain as a haven

UK growth rebound eases recession fears

by International Commercial Investment on September 10, 2019

Source: BBC News

The UK’s economy grew faster than expected in July, easing fears that it could fall into recession.

The economy grew 0.3% in July, the UK’s official statistics body said, helped by the dominant services sector.

Growth was flat over the three months to July, but this was an improvement on the 0.2% contraction seen in the April-to-June quarter.

This contraction, coupled with some weak business surveys, raised concerns the UK was heading for recessio

An economy is generally deemed to be in recession if it contracts for two quarters in a row.

However, while growth in the services sector – which accounts for about 80% of the UK economy – helped to drive July’s stronger-than-expected growth figure, the Office for National Statistics (ONS) warned that the sector remained weak.

“While the largest part of the economy, the services sector, returned to growth in the month of July, the underlying picture shows services growth weakening through 2019,” the ONS said.

The pound rose in reaction to the figures, rising 0.6% against the dollar to $1.2357.

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