By JULIA WERDIGIER and BETTINA WASSENER
Published: September 17, 2010
LONDON — Naomi Minegishi, 21, a Japanese woman who lived in
China for 10 years, recently took a job with the London property broker Felicity J Lord.
Ms. Minegishi was hired not for her experience in real
estate sales — she is studying management at a London university — but for her language ability. She is fluent in Mandarin, an increasingly valuable skill in London’s residential real estate market.
With her help, the agency recently sold four three-bedroom apartments in a new development for £320,000, about $500,000, each to a different Chinese buyer and solely on the basis of photos and floor plans. The new construction is close to the Olympic stadium, and the investors are betting that real estate prices will rise before the Games in 2012.
Chinese clients are a dream, Ms. Minegishi said. “They are wealthy, they pay in cash, and they’re looking for good value.”
Chinese citizens require approval from their local authorities to invest more than the equivalent of $50,000 a year overseas. But many wealthy Chinese elude the restrictions with help from trust funds and foreign bank accounts, real estate brokers say.
The London property market might have shown signs of cooling recently, but investors from mainland China and Hong Kong are busier than ever — bidding, for example, on luxury apartments in the fashionable Knightsbridge district down the road from Harrods department store and on new homes near the Canary Wharf financial district.
In some parts of London, mainland Chinese investors have already replaced those from Russia and the Middle East as the busiest real estate buyers with deep pockets, looking for trophy assets and pushing up prices, some brokers say.
Buyers from mainland China are a tiny portion of purchasers of high-end real estate in London, accounting for 5 percent of all purchases by foreigners of London properties valued from £500,000 to £1 million this year. But they are a growing presence. They accounted for less than 1 percent of purchases in that price range last year, according to Savills, a real estate agency.
Europeans still make up the largest portion, Savills says, although it does not break down buyers by country.
Unlike clients from Russia and the Middle East, however, few Chinese buyers are looking for London apartments to live in themselves. A majority of them are seeking investments in a real estate market they perceive as more stable than their own and are planning to receive steady rental income for years, Ms. Minegishi said.
For wealthy Asians, fears that governments may impose more constraints on red-hot local property markets back home have made investments abroad more attractive.
Rapid economic growth and easy credit caused real estate prices in many parts of Asia to rise sharply late last year. In Hong Kong, for example, prices for luxury homes have jumped 45 percent since 2009, according to Savills.
Last month, to prevent prices from overheating, Singapore raised the down payment required for many home purchases. The step followed similar measures in mainland China and Hong Kong this year.
By contrast, prices dropped more than 10 percent across
Britain after
Lehman Brothers collapsed in 2008, although the prices of exclusive properties in London held up better than those in the rest of the country, buoyed by foreign buyers.
Prices of high-end London real estate rose 8.75 percent in 2009, compared with a drop of 2.25 percent in the southwest of Britain, Savills said.
Not surprisingly, the property industry in Britain is adapting to meet the Chinese demand. Brokers are hiring Mandarin speakers like Ms. Minegishi, as well as Cantonese speakers to cater to people from Hong Kong.
Savills organized a seminar in Shanghai in July to teach 100 clients how to buy real estate in London. A rival agency, Hamptons International, opened an office in Hong Kong with four employees about two months ago.
Some London developers, meanwhile, are omitting the number four in new buildings because it is considered unlucky in Chinese culture.
“Most developers in London are including China in their marketing efforts,” said Matthew Tack, a director at Hamptons in London. “They’d be silly not to.”
The increase in transactions highlights a gradual shift in wealth to Asia, including mainland China. Free of the debt levels that still haunt Western households and governments, much of Asia began to recover rapidly from the global economic downturn last year.
And although a large majority of Asians still struggle to make ends meet, the booming growth has catapulted many into the ranks of the wealthy and superwealthy.
In mainland China alone, the number of people with assets worth more than 10 million renminbi, or $1.5 million, rose 6.1 percent, to 875,000, in a year, according to the Hurun Research Institute in Shanghai.
Then there are the fabulously wealthy, like Joseph Lau, a Hong Kong real estate billionaire who recently spent £33 million on a six-floor mansion in Eaton Square in London, an address he shares with the Russian oligarch Roman A. Abramovich. Mr. Lau’s son, Lau Ming-wai, studied at the London School of Economics and then worked for
Goldman Sachs in London.
More typical, though, are Asian buyers spending £1 million or less. Because of China’s restrictions on overseas investments, most of the Chinese buyers pay cash to minimize the paper trail. None of the London brokers interviewed for this article were willing to disclose the identities of buyers or introduce them to a reporter.
Although Chinese are becoming more active in many overseas real estate markets, including the United States and Continental Europe, London remains highly popular for a variety of reasons, brokers say. Britain has almost no restrictions on whether foreigners can own real estate, and a fairly fluid rental market, which is attractive to buyers seeking income from their properties.
Cultural issues, especially the Chinese emphasis on education, also favor the acquisition of London addresses.
Education is generally the largest budget item in a Chinese household, and many families hope to send their children to elite universities in Britain, which tend to admit more foreign students than top universities in the United States, said Jeff Cao, head of the China sector for Think London, a government-supported agency that helps attract foreign investment to the city.
The number of Chinese students at London universities rose 9 percent, to 948, last year from 867 a year earlier, according to the Universities and Colleges Admissions Service.
For some Chinese buyers in London, Mr. Cao said, the idea is to find apartments big enough to provide the children with more comfortable accommodations than student dormitories and that have spare rooms that can be rented out. Once the children graduate, their parents aim to rent out the whole apartment.
One mainland Chinese investor who owns real estate in London and elsewhere said his London investments were his most lucrative.
“I bought a flat for my daughter’s use when she was studying in London and other flats I have rented out or sold,” Mr. Lai, the owner, who declined to give his first name to protect his privacy, wrote by e-mail.
“The U.K. traditionally has a very good legal structure with good law and order,” Mr. Lai wrote. “That, together with the city’s financial institutions and the British people’s love for owning their own homes, makes the property market extremely attractive.”
Real estate brokers who cater to Chinese customers say it is unclear whether and when the appetite from China will start to ebb. But there is no indication of a pullback yet.
Bettina Wassener reported from Hong Kong.
Dexia
