Four perfectly symmetrical red roses in a frosted glass vase, a laminated London Tube map and a Casio calculator. No additional clutter. Just three items. All carefully positioned on each of the seven, circular tables in the Edinburgh Room on the second floor of the Mandarin Oriental. Outside in the corridor hotel waiters scurry to set up jasmine tea and piles of dim sum as property agency staff take their seats behind a registration desk stacked high with glossy brochures. It may still only be 3am back in London but on Hong Kong Island the UK capital is now officially open for business.
Welcome to the world of the property exhibition. Weekend after weekend UK-based agents and developers descend on five-star hotels in carefully selected Asian cities to present London’s hottest new luxury residential developments to overseas buyers.
It is a practice which has been criticised for fuelling London property prices and 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 MIPIM in March to sign a charter pledging to launch properties in London at the same time as in south-east Asia. But he also warned that excessive negativity around foreign investment could be equally damaging and that the UK should beware of forcing overseas interest to look elsewhere.
So, just how detrimental are these sales fairs to UK buyers? And against the backdrop of increasing 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 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 sees agent Fraser & Co working with CBRE to sell The Royal Residence Hyde Park, on Talbot Square, W2. Six flats, an £11m 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 – including a lawyer to facilitate rapid contract exchanges – 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 on the project and what 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 two flats have been sold and every table is occupied by prospective buyers. And the power of a busy room is not to be underestimated. Crowds mean momentum. They create a buzz, excitement and, crucially, a sense of urgency. On one occasion, two tables prepare to leave just as a possible deal on a third is at a crucial stage. One glance from the agent about to close and two of the developers’ representatives each grab a furniture brochure and make beelines for the departing parties. The distraction keeps them in the room just long enough to sustain the necessary murmur of noise to seal the deal.
As far as sales techniques go, so far, so normal. The difference between this event and a standard UK sale becomes especially evident when listening in on one-on-one sales negotiations. Examples of genuine questions overheard include: “How many days’ rain will there be on the flat each year?” and “How similar is it to Downtown Abbey?” Naive, but a staggering number of these buyers have never been to London. Some have no intention of ever going to see their investment and their knowledge of the market and the city is limited.
Traditionally this has been the fear among domestic buyers: that overseas investors with limited local knowledge are buying up swathes of the capital.
In reality the big question, and the one that will have the most impact on London real estate and UK buyers, is not who they are but what they plan to do with their newly acquired properties.
Hiding behind the wrong issue
“We are hiding behind the wrong issue here,” says deputy London mayor Sir Edward Lister. “This is not about overseas buyers spending money in the UK. And we need to be very careful of anti-overseas-investment rhetoric.
“It is dangerous because, being brutally honest, a lot of London’s new residential developments would not be able to get off the ground without foreign investment. The question is what they plan to do with their assets. There is a big difference between overseas buyers purchasing London property with plans to make use of it and those who will leave it vacant. If they are buying flats for buy-to-let purposes or for their children to live in while they study, I don’t see a problem with that.”
He adds that the preferential rates and the comparably lower cost of borrowing from overseas banks for UK mortgages does potentially give overseas buyers an advantage when it comes to getting on the London housing ladder. But says this is something that needs to be addressed here in the UK. “We have raised this issue with the British Bankers’ Association. It is becoming an issue.”
A leading residential property lawyer adds that most overseas buyers are more likely to purchase property as a buy-to-let investment than as a bolthole to leave empty, as they want to make the greatest possible return. “Most of the overseas buyers we see are not looking for an occasional holiday home. They want to make as much money off their asset as possible. They can only get preferential rates on borrowing on buy-to-let. Not as an owner-occupier. So, unless they are buying for a child to live in as they study, the majority are looking to rent out their new asset.”
And the mix of buyers and the questions being asked at the Royal Residence sale suggest that this is the case. The Casio calculators are put to good, and near constant, use as rental yields are worked out before being swiftly converted into Hong Kong dollars per week, month, and year – even per decade.
Many buyers also ask – whether in relation to their own children or taking international students more generally into consideration – where the development is in relation to London’s top universities, with UCL and Imperial garnering the most vigorous nods of approval. Then come the questions around 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, miraculously, it appears to do the trick more often than not.
It doesn’t work on everyone, not least because while the majority of the visitors and buyers are from Hong Kong, two of the six properties are bought by Brits living in China.
“We do put more resources to drive the sales in Hong Kong with the Asian office and a team based in Hong Kong,” concedes Therianos. “But the appetite from the UK is also very good and we will launch more projects targeted at local clients this year.”
Best city for investment
As for concerns about anti-overseas rhetoric here in the UK, so far there is no evidence to suggest this is driving foreign buyers elsewhere.
“London is where everyone wants to be. It is the best city for investment,” says one regular Fraser’s client – a Hong Kong Chinese banker. “I have five or six properties in London and I buy them for the high rental yields. I have only been to the UK once about 10 years ago, so the properties are not for me.
“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 there is 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.”
At one stage the team’s only hope looks to be the fondly nicknamed Dim Sum Lady. An elderly Chinese woman sat on a chair in the corridor gripping a plate piled high with snacks. She comes to every event but never actually goes into the sales room. Rather she spends the weekend eating free food and then leaves. The chances of her making an offer on a £1.2m flat are slim. And indeed she shuffles off on cue once the waiters stop replenishing the mini cheeseburgers.
But then everything turns around. 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, arrives just before 7pm. “You see this happen all the time,” says Jenson. “Often they have already been in over the weekend, so they know what they are looking for, and they 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 £11m sales target in just 48 hours. Done. It may have taken a little more than perfectly symmetrical red roses, a laminated London Tube map and a Casio calculator, but the Chinese love affair with London real estate is still flourishing, for now.
emily.wright@estatesgazette.com
