MIPIM ASIA: The northern powerhouse and private rented sector are expected to draw Far Eastern capital into the UK real estate sector.
At an Estates Gazette panel session at MIPIM Asia in Hong Kong exploring outbound investment to the UK, chancellor George Osborne’s drive behind both areas were expected to help attract more equity.
“We are now starting to look at projects nationally,” said Neil Robinson, director of global communications at ABP London Investment, the company behind the regeneration of London’s Royal Albert Dock.
“The government is promoting the north of England, and rightly so, as place of opportunity. ABP is partly interested in that because the margin for success can be quite large as land can be quite cheap.”
With the political will behind growing the northern economy with infrastructure investment, Eversheds partner Bruce Dear said that making long-term investments that align with this agenda is something Far Eastern investors should be considering.
“At first I thought it was just a marketing exercise by the UK government, but I think there is money to be made by being part of it. The UK will become less London-centric and it has to become more of a balanced, multi-centred economy like in Germany,” he said.
Not everyone was so convinced, however. Frank Marriott, senior director and head of real estate capital market, Asia Pacific, at Savills said that the majority of new Chinese capital was first attracted to the US and when it was moving to the UK, it would generally be targeting London only.
“The UK is falling a long way behind the US and with Australia [in attracting Chinese capital]. London now looks very toppy. It may not be the top of the market but just the new norm,” he said.
“Mainland clients are not interested in anything other than London. The Chinese [high-net-worth] money is more focused in the US as that is where more of their kids are at university. The Chinese attitude is to focus on the US, and the South East Asia attitude is to look to the UK because of historical ties.”
Osborne’s hiking of stamp duty on second homes in last week’s Spending Review is predicted to damage the buy-to-let market for private investors. However, with the new rules not applying to institutional investors, this could give a further boon to the private rented sector and a further reason for Asian capital to enter the market.
“There is a real opportunity in the build-to-rent market for bigger institutional players now. With the chancellor having effectively destroyed the buy-to-let market, there is an opportunity to fill that vacuum,” said Dear.
“That exact thing has happened in the student accommodation market to the point that it is so heavily institutionalised it is not affordable for us,” said Richard Thomas, senior advisor to the board and chief representative at Gatehouse Bank, which has established its own PRS platform backed by Sigma Capital.
