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Overseas investors double share of property in Scotland since last financial crisis

The share of overseas investment in Scottish commercial property has doubled since the last financial crisis, according to Colliers International.

The real estate advisor said finance had flooded in to the country from Middle East and Asian investors seeking stable assets and from many in mainland Europe in search of value for money.

Colliers’ report, Regional Revolution III, Rise of Cross Border Investment, 2020, compared inflows to the market between 2002 to 2006 with the period from 2014 to 2018.

Overseas investors’ share of the Scottish market grew from 19% to 41%. Investment increased from less than £250 million in 2002 to £1.25 billion in 2016.

Oliver Kolodseike, an associate director with Colliers International, said: “Looking at what attracts overseas investors to Scotland, the country benefits from fairly competitive pricing, while still being a transparent and relatively stable market, compared to other parts of the UK and Europe.

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“It also enjoys strong occupational demand in the office sector, has an educated workforce, leading universities and low unemployment.”

Colliers reports that the sector in Scotland was attracting increased interest this year until the lockdown brought transactions to a near halt.

Investment in commercial property for the first quarter of 2020 was double that of the same period last year, the firm said. Last year, total investment topped the £2 billion mark for the sixth year running.

Between 2002-2006 and 2014-2018, Colliers found, Irish investors largely withdrew from the UK regional market while money increased from Asia, the Middle East and other parts of Europe.

Kolodseike said the fallout from the last financial crisis, plummeting oil prices between 2014 and 2016 and political uncertainty had contributed to a slump in the domestic share of investment.

He added: “A large part of Scotland’s tax revenues comes from oil and a falling oil price deepens Scotland’s fiscal deficit. The fall in oil prices and the independence referendum had a downward effect on overall investment volumes in Scotland.

“While these factors contributed to a degree of hesitation among domestic buyers, cross-border investors increased their exposure to the market. Loose global monetary policy, a weak sterling and competitive pricing, compared to other markets, also contributed to the attraction of foreign buyers.”

Last year, investment included the £27 million acquisition of Centrica’s HQ in Edinburgh by Dubai-based BLME/Darin Partners, the £55 million acquisition of the Sauchiehall Centre in Glasgow by 90 North and Saudi firm Arbah Capital, and the £22 million purchase of Technip HQ in Aberdeen by Black Sands of Bahrain.

Korea is also a major player. Unnamed investors bought the Leonardo Innovation Hub at Edinburgh’s Crewe Toll for £100 million, and Glasgow’s 110 St Vincent Street. Hyundai Asset Management acquired an NHS base at Gyle Square for £55 million, while Mirae Asset Global Investments bought Morgan Stanley’s new headquarters in Glasgow.

In May, one of Germany’s largest pension funds bought the Aberdeen Standard HQ at St Andrew Square, Edinburgh, for £120 million.

US investor Blackstone bought Eurocentral warehouses Colossus 1 and Colossus 2 for £16 million in February this year, while CBRE acquired the nearby BrewDog Hop Hub for £10 million last November.

Colliers predicts the commercial property market will recover from Covid-19 because large investors such as pension funds need long-term, secure income streams.

Patrick Ford, Glasgow-based director of national capital markets, said: “Overseas capital continues to dominate the Scottish investment market. We are aware of circa £250 million of offices that are currently under offer in Glasgow and Edinburgh to Far Eastern investors. First into the pandemic and first out may see Asia back in the market sooner than, for example, Europe.”

By Hamish Burns

Source: Insider

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Hong Kong and Chinese investment in London properties soars to new levels

According to up-market estate agency, Beauchamp Estates, Hong Kong and mainland Chinese investment in luxury Prime Central London residential property has soared to new levels, despite the global COVID-19 pandemic.

This group now accounts for 15% of international buyer home sales above £1million across pime central London and 20% of deals above £10 million.

The figures could to go higher with the proposed Hong Kong visa changes set to open the door to UK citizenship and further property investment for thousands more Hong Kongers.

Since the UK General Election of 12th December 2019 Beauchamp Estates has sold over £300 million worth of luxury London residential property to Hong Kong buyers in locations including Knightsbridge, Belgravia and Islington.

In rank order their largest groups of overseas clients investing in London luxury property are Chinese/Hong Kong buyers followed by Russians and Indians.

Last year the Office for National Statistics (ONS) data shows that Hong Kong and mainland Chinese buyers invested £7.69 billion in London property including over £750 million invested in residential property in the City of Westminster and the Royal Borough of Kensington & Chelsea.

ONS data shows that there are now some 218,975 properties in London owned by Chinese/HK buyers comprising 98,725 owned by Hong Kongers and 120,250 by mainland Chinese making London property the most popular investment destination for Chinese capital in the world.

Beauchamp Estates says that there are five distinct types of Chinese investors purchasing property in London.

The first group are purchasing one and two bedroom new build rental-investment apartments priced up to £2 million in locations including Canary Wharf, the City, Islington and the River Thames in Battersea, Chelsea and Fulham.

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The investors are looking at a 3-5% yield and often purchase off-plan and in bulk in order to gain a price discount/advantage.

The second group of buyers are affluent upper middle class Chinese and Hong Kong families typically spending between £5 million to £10 million for a London family home/luxury pied-a-terre in locations including St John’s Wood, Marylebone or Regent’s Park or £750,000 to £1.5 million for an apartment in Aldwych, Soho or Fitzrovia for their student offspring studying in London.

For these middle class families proximity to a good school or university is paramount and they like Marylebone and St John’s Wood because both are close to the Chinese Embassy at 49-51 Portland Place around which the Chinese political elite working in London are based.

The third buyer group are mainland China and Hong Kong’s super-wealthy business elite who will spend upwards of £15 million on a trophy property, typically something with a prestigious history or ultra-luxury design, located in London’s most prestigious addresses.

Beauchamp Estates say that this elite group prefer to buy either mansions in Knightsbridge, Mayfair, Belgravia or Avenue Road in St John’s Wood priced from £25 million to over £200 million or penthouses in trophy apartment buildings such as Clarges Mayfair, One Hyde Park, 20 Grosvenor Square or No.1 Grosvenor Square priced from £20 million up to £80 million.

The fourth buyer group are China and Hong Kong’s large corporations and property developers.

These corporations either invest in commercial property in the City, Canary Wharf or West End, or undertake direct or joint venture residential projects in the UK capital.

Over 40% of London’s office investment deals by international firms over the last two years have been done by Hong Kong corporations including CC Land, CK Asset Holdings, Nan Fung Group and Sino Group.

Beauchamp Estates observe that in addition, Chinese property corporations have undertaken joint ventures with domestic London developers examples include Sun Hung Kai Properties with Ballymore, Vanke with Galliard Homes and CC Land with Finchatton.

The fifth buyer group are Chinese Sovereign Wealth entities such as CIC which has been a major investor in London real estate.

Gary Hersham, Founding Director of Beauchamp Estates says:

“Since the 2019 General Election we have sold over £300 million of luxury London residential property to clients from Hong Kong.

“Over the last 12 months mainland and Hong Kong investors have become the leading overseas buyer group purchasing luxury London property and their dominance in the market has grown despite the COVID-19 pandemic.

“There are five different types of Chinese investor in the capital but sometimes these groups overlap, for example a large Hong kong corporation buys commercial property in the City, followed by the CEO buying a £100m mansion in Belgravia.”

“The Chinese believe that living on high ground or in homes where you are elevated above others brings good fortune, hence their preference for penthouses or landmark buildings.

“For the Hong Kong super-rich buying a trophy London mansion or penthouse is good for their personal profile, generating columns of profile boosting PR in traditional media and a storm on social media.”

Marcus O’Brien of Beauchamp Estates Private Office says:

“Wealth creation and the development of the property markets in Europe has taken 200 years, in China the same process has taken just 20 years.

“This huge acceleration of wealth creation and property development in China – some cities take just six months to construct – has provided China and Hong Kong with a “new money” middle class and a new money super-rich elite.”

“Because China’s wealth is so new, Chinese and Hong Kong buyers in London like purchasing either new homes or historic properties which have newly refurbished super-luxury interiors.

“The Chinese middle class life is focused around family whilst the business elite have a very consumer-concentric culture, they need to be seen to be successful when benchmarked against their peers, so if one buys a London property a business rival needs to acquire an even better one.”

Beauchamp Estates highlight that because of the poor Chinese bilateral relationships with the USA, Canada and Australia where the Chinese/Hong Kong elite would have formerly purchased property in Malibu, Los Angeles, the Hamptons and Toronto they have now retreated from these locations and prefer to invest in London.

Overseas buyer tax rates in Canada (20%) and Singapore (20%) are much higher than London and mainland and Hong Kong buyers often await getting UK residency visas before buying homes, thereby avoiding additional Stamp Duty.

Source: Property Industry Eye