Overseas property exhibitions have been criticised for pushing up prices and locking out UK buyers. Emily Wright reports from a Hong Kong sales fair
Weekend after weekend UK-based agents and developers descend on five-star hotels in selected Asian cities to present London’s hottest new luxury residential developments to overseas buyers.
It is a practice which has long been criticised as an irresponsible fuelling of London property prices and one that has been slammed for locking UK buyers out of their own market. The debate, which reached fever pitch last year, saw London mayor Boris Johnson call on developers at last year’s MIPIM property conference to sign a charter pledging to launch properties in London at the same time as in south-east Asia. But he also warned that too much negativity around foreign investment could be equally damaging and that the UK should beware of forcing overseas interest to look elsewhere.
So, against the backdrop of increasingly anti-foreign-investment rhetoric, are there early signs that the Chinese love affair with London property is souring? Or is the UK capital still the safe-haven city of choice?
Great expectations
If last month’s exhibition at Hong Kong’s Mandarin Oriental is anything to go by, London has not lost its crown just yet. A strong appetite for prime central property is only being fuelled by the slowing of China’s own economy. And as for rising prices? They are still nowhere near the dizzying Hong Kong averages, which are now around 15 times the median household income, compared with seven times in London.
The weekend in question saw agent Fraser & Co working with CBRE to sell The Royal Residence Hyde Park, on Talbot Square, W2. Six flats, an £8m sales target and just 48 hours to seal every deal. The agents – a mix of British and Hong Kong Chinese – are acting on behalf of developer Euroterra Capital. Managing partner Pantazis Therianos has flown in with his team from London to oversee progress and he has high expectations.
“The developers obviously always want a scheme to sell out,” says Neil Jensen, Fraser & Co’s head of operations for Asia. “That happening depends a bit on the project and what the buyers are looking for. This particular development is very boutique, traditional. It is quintessentially British, so I am hopeful. But there is always a lot of pressure to sell every flat. It can get quite stressful.”
Good news then that just two hours into day one and not only have two flats been sold but every table is occupied by prospective buyers. Most are Hong Kong Chinese looking for buy-to-let properties or for accommodation for their children studying in London. Though two of the six properties are bought by Brits living in China.
One of the most popular questions put to the agents is where the development is in relation to London’s top universities, with UCL and Imperial garnering the most vigorous nods of approval. Other common questions concern rental yields, crime rates, transport links and proximity to luxury destinations such as Bond Street, Knightsbridge and South Kensington. “Tony Blair lives around the corner,” is one agent’s go-to answer, and it appears to do the trick more often than not.
More unusual queries overheard at the event include: “How many days’ rain will there be on the flat each year?” and “How similar is it to Downton Abbey?” Naive, but a staggering number of these buyers have never been to London. They have no intention of ever going to see their investment and their knowledge of the market and the city is limited. They are making their decisions solely based on reputation, stability and returns. But, for now at least, they don’t doubt they are choosing the right city.
“I have five or six properties in London,” says one regular Fraser’s client – a Hong Kong Chinese banker. “I buy them for the high rental yields. London is where everyone wants to be. It is a good city for investment. I have only been once myself, about 10 years ago.
“Like many others, I am only looking at prime central. I want to buy in well-known areas like Mayfair and Knightsbridge. I have no interest in the outskirts or the rest of the UK – definitely not the regions.”
Whether this focus on the heart of the city will start to shift to zones 2 and 3 as price growth continues remains to be seen. The reticence could be down to a lack of knowledge among long-distance buyers – the aforementioned banker had never even heard of Battersea. But for now at least, individual Chinese buyers have yet to follow their developer counterparts, the likes of Greenland and Knight Dragon, to the fringes. And the consensus at this event is that they would rather look beyond the UK than consider the regions: “London is our first choice,” says one prospective buyer. “After that it is a decision between Sydney or New York rather than elsewhere in the UK.”
Last-minute bargains
By 5pm on the second day of sales there is still one flat remaining. Tensions are mounting as it is the basement property and these are the toughest to sell to Asian buyers. “They worry about crime and safety,” says one of the agents. “And they don’t like the bottom flat or being underground as there are issues around status and connotations of death and burial. This one will be tough to sell.”
But a savvy buyer, one who knows the last deal of the day will be a good one as the developer is desperate to report a sell-out, comes in just before 7pm. “You see this happen all the time,” says Jenson. “Often they have already been in earlier over the weekend, so they know what they are looking for, and they will come back right as we are about to shut the doors to see if they can get a last-minute deal.”
It is clearly a good system. Two hours later and below the asking price, contracts are exchanged and the exhausted UK-based agents, lawyers, mortgage advisers and portfolio managers can make their airport dash in high spirits.
Six flats and an £8m sales target in just 48 hours. Done. The Chinese love affair with London real estate is still flourishing, for now.
