Chinese real estate investors inject billions into London

Real estate investment overseas has seen a dramatic increase in China. Between 2013 and 2014, overseas residential investment increased by 84%, with institutional investment rising 17%. The city’s efforts to attract wealthy foreign investors paid off, as London was the most popular institutional investment destination in 2014, netting £1.35billion ($2.3billion) (source: Reuters). London is particularly attractive to Chinese real estate investors thanks to high yields caused by the current low interest rate, according to Europe Real Estate.

In 2014 Chinese real estate investors invested more money into the capital than all European investors combined, with a total of £2.2billion, beaten only by £3.4billion from the US. Analysis from Savills, an international real estate advisor, suggests that the key Chinese investors in the market are making multiple transactions. It is hotly anticipated that 2015 will be another strong year for Chinese investment in London (source: Property Wire).

Large scale opportunities

Chinese real estate investors are not just making lots of investments; they are making sizeable ones. In 2014, China Life – China’s biggest life insurance provider – bought 70% of a 1million square foot office located at 10 Upper Bank Street. The building, along Canary Wharf, carried an annual rental of £44.35million pounds, and China Life paid £795million for its share.

The investment dwarfs the previous record sum paid by a Chinese real estate investor when Ping An Group paid £260million for the Lloyd’s Building (source: Mingtiandi).

Chinese investors backing development projects

Chinese money is also being used to finance new developments and construction in the capital. A new project, masterminded by the Advanced Business Park in Beijing, aims to create a centre for Asian business in eastern London. The Asian Business Port will be a business and retail hub, complete with housing and a waterfront boulevard, and is scheduled for completion in 2023.

While only a year old, China Minsheng Investment has already become one of China’s largest private equity firms. The firm, which has an $8billion investment fund, is backing the Asian Business Port with £1billion ($1.5billion) worth of investment, making Minsheng Investment the largest investor in the project (source: Forbes).

More real estate investors from China looking to London

Chinese real estate investment in the United Kingdom is not a trend that is likely to stop any time soon. As the Chinese economy grows, more people are looking to secure assets abroad, with property being one of the most sensible investment choices. As the Chinese currency strengthens, buying property in London becomes more appealing: investors in 2013 were enjoying buying property at a rate 8% cheaper in 2013 than it was six years prior (source: Property Wire).

According to one report, it is anticipated that £105billion worth of Chinese money is earmarked for investment in UK industries between now and 2025, with real estate investment potentially accounting for £36billion of the total over the next 10 years (source: Pinsent Masons).

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