Russian purchasers have been prominent in the UK residential market for a number of years, as have Indian buyers although the latter group has been less high profile given the long established presence of the Indian community. Chinese buyers have predominantly come via Hong Kong, although as regulatory control is increasingly liberalised we expect to see growth in direct investment from mainland China. Brazilian buyers are comparatively rare, however, if the pattern of other emerging economies is followed then once a stream of FDI is established, investment in property markets will follow.
When buying for their own use Indians prefer large, traditional single floor apartments. St John’s Wood has emerged over the last two years as an alternative to the traditional prime London addresses, offering spacious properties and private gardens which are sought after but rare in central London. Purchases in the top price sector are commonly made through offshore trusts or corporate entities.
The increase in FDI from the Asia-Pacific region is reflected in the growth in residential purchase activity in the UK. Between 2005 and 2006, buyers from the region increased their market share among overseas buyers in prime central London from 1.3% to 6.1%, of which around one third were Chinese. We anticipate that the pronounced increase in Chinese FDI in London will trigger strong buying growth in the prime residential market as executives on longer term contracts seek properties for owner occupation and domestic Chinese investors grow more comfortable and knowledgeable about investment opportunities.
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At present, Chinese investor activity is concentrated predominantly on the Asia-Pacific market and further afield North America especially in Canada. Chinese investment in foreign residential markets is forecast to increase as HNWIs look to export their capital to stable economies. In light of recent legislation introduced by the Chinese Central Government in May of last year aimed at cooling the rate of property price inflation in the major cities, the returns achieved in UK investments may look more attractive to Chinese investors.
The UK is the most popular investor destination outside of the Far East for Hong Kong buyers whose focus is typically on the apartment sector at prices between £300,000 to £600,000 depending on location. There is also some interest in prime locations such as Knightsbridge and Belgravia where budgets will typically range between £1 million and £2 million+.