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A buyer’s market for UK with demand from overseas purchasers

One Global Group predicts that the United Kingdom (UK) will experience a return to the buyer’s market in the coming year and that demand from Malaysia and other international markets will increase even more.

The company is optimistic about 2023 since the year’s market circumstances would be perfect for foreign purchasers wishing to buy a home in the UK.

“We’re seeing buyers from across Asia purchasing in UK locations that are offering the best value for money,” said Eli McGeever, director of research and technology innovation at One Global Labs.

“What ties these investors together is that they’re all purchasing for one of these four reasons, which is as a place for somewhere for their children to live while studying, as wealth preservation, to diversify their assets, or they are immigrating and need a home to live in,” he said.

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According to McGeever, although borrowing rates are higher than they were earlier this year, purchasers have a lot more options because there are still currency gains to be had and rising house inventory levels.

“That being said, buyers in Hong Kong have a broad interest, due to the diversity of buyers, from seasoned investors to BNO buyers looking to purchase a home to live in. There are many more types of properties demanded compared to a few years ago. These can range from apartments in inner London, to detached/semi-detached homes in the Home Counties.

“Hong Kongers have also been strong buyers in regional powerhouses, such as Manchester and Birmingham. Whereas buyers in Singapore and Malaysia are still more interested in London,” he said.

McGeever said there are five key areas that are going to make 2023 a buyer’s market and the ideal time for investors in Asia looking to purchase a home in the UK.

“These are price corrections in some markets, more home inventory, strong rental price growth, favourable exchange rates, and, mortgage rates lowering,” he said.

McGeever said that following the unsustainable real estate buying frenzy of the previous two years, sales volumes have returned to pre-pandemic levels.

Although costs are still rising in much of the UK on an annual basis, he said that they have started to decline in select markets.

“What’s likely to happen next year is that prices will correct by a couple of percentage points in some markets while staying pretty level or rising in others. Each city has its markets. For example, areas in London such as Harrow, Hounslow, and Newham will likely outperform the market, as will areas in Manchester, such as its city centre,” he said.

McGeever said that the housing stock is finally increasing, which will bring the real estate market some much-needed equilibrium.

He said that a lack of available housing has contributed to the dramatic price growth that has occurred since the Covid epidemic began.

According to him, building more homes will assist to slow the price increase.

The housing stock has increased by 40 per cent over the last year, according to Zoopla. But inventories are still 19 per cent below levels from 2017 to 2019.

According to McGeever, rental costs have increased quickly in the UK over the past year, and he doesn’t think this trend will slow down in 2023.

He said the high rental costs will probably encourage more people to look into purchasing a home, particularly first-time purchasers who would prefer to increase their equity in a brand-new residence.

“Investors who are looking for a buy-to-let property should not be concerned about demand weakening anytime soon. We expect the Pound Sterling to remain below rates seen only a year ago. This provides savings over any expected interest rate rise. However, One Global Group expects the Pound Sterling to strengthen for 2023 so early movers will benefit,” he said.

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Pent-up demand in off-plan projects

McGeever said that interest in off-plan projects has increased.

Buying off the beaten path enables purchasers who need financing to secure a mortgage close to the project’s completion date, he said.

He said this is a smart choice for people who anticipate that the interest rate will drop in 12, 24, or 36 months.

“Property developers are also currently offering more competitive pricing and lower deposits. This trend is expected to continue in the year to come,” he said.

According to him, notable projects in the UK with strong buying interest from overseas buyers include Graphite Square (Vauxhall, London), Fulton & Fifth (Wembley, London), and One Victoria (Victoria District, Manchester).

Graphite Square is a residential development by Third.i Group in London’s Vauxhall.

“The residences are just a short distance from the River Thames, the West End, Battersea Park, and Chelsea, so residents are never too far away from your next adventure in the capital. Prices start from £735,000 in the loft-style residences akin to what you might find in New York City’s Manhattan,” he said.

Fulton & Fifth, the newest development from Regal London is an upscale, “live-work-play” Wembley Park project comprising five apartment blocks set along Wealdstone Brook that will hold more than 800 homes on completion in early 2025. Prices start from £440,000.

One Victoria is a development by One Heritage Group PLC. Set over two blocks, it fronts Great Ducie Street. One East is a 14-storey building with 84 apartments while One West is 10 storeys high with 45 apartments, with prices starting from £199,000.

By Kathy B

Source: New Straits Times

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Overseas buyers will help avert a property market crash – claim 

A property tax consultant has hit back at suggestions of a housing market crash, suggesting that overseas investors will help sustain growth.

David Hannah, group chairman at Cornerstone Tax, has predicted that price growth will slow but said he is confident that it won’t turn negative.

It comes as a survey of 2,000 people by the firm found 55% were not deterred from purchasing property in 2023 – compared with 45% who said they would halt proceedings.

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Hannah said the 55% who will follow through with purchases in 2023 will most likely be buyers who are less dependable on interest rates.

Foreign investors will also seek to take advantage of the fall in the price of sterling, essentially, making the UK housing market 10% cheaper, he said.

He added that the 45% that will hold off on purchasing will be most likely first-time buyers, who now cannot afford the inflated mortgage payments.

Hannah said: “In early 2023 we will see slow demand. Only those people that are forced to sell will see a small fall in prices, however, over the whole of 2023, I expect to see low to mid to single-digit growth over the UK property market- between 5-8%.

“Despite the negative headlines we have been seeing, there is an underlying pressure on the market and that is leading to upward pressure on prices.

“We now have a growing number of people that want to move to the UK.

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“The first is the overseas investor who regards UK property as a safe haven for their money because the country they principally live in is not economically or politically safe.“The second are those who want to become second homeowners. The third and final group is those who want to leave their country of birth and are in need of a home.”

He suggests all of these factors over the course of the next 12 months will support the market, adding: “There will be no crash and no 10-20% fall in property prices that we saw in the noughties. The UK property market has tended to be more stable than any other global market in property.”

By Marc Shoffman

Source: Estate Agent Today

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Foreign property investors must be registered, says government

The government is urging all overseas entities who own property in the UK to register at Companies House.

The Register of Overseas Entities came into force in August this year and requires all entities in scope to register with Companies House before the deadline of January 31 2023. The registration process involved them declaring the beneficial owners and/or managing officers for properties in this country.

As the deadline nears, Companies House is urging overseas entities and agents to register in good time and avoid some common pitfalls.

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To make sure registrations are processed quickly, Companies House is recommending that agents  work with their clients to make sure all the information is correct before their registration is submitted , to file as early as possible before the deadline of January 31, and for agents to file on behalf of their clients – it’s likely to be easier and quicker for them than for the clients.

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Overseas entities must register on time to avoid prosecution or civil financial penalties. Overseas entities that fail to register will also find it difficult to sell, lease or raise charges over their land. 

Rachael Watts, Head of Register of Overseas Entities at Companies House, says: “We have seen a significant number of filings rejected with most of these due to errors in the agent information section. Common errors include the registry name being abbreviated or incorrect, and inconsistencies in the agent’s name, overall person with responsibility, address, and email address.

“By minimising these errors and registering in good time, overseas entities and agents can avoid running into issues later on.”

By Graham Norwood

Source: Letting Agent Today

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Pound’s weakness could boost overseas investment in ‘resilient’ Scots property market

Sterling’s weakness could boost overseas investment in a “resilient” Scottish commercial property market, industry experts believe.

Property consultancy Knight Frank found that investment volumes in commercial property north of the Border rose by 37 per cent during the first nine months of 2022 compared to the same period last year, increasing to £1.46 billion from £1.06bn.

Offices were the most popular asset type, accounting for just over one-third of total investment volumes. Investment in industrial property almost doubled, from £157 million to £300m, as interest levels in the sector continued to increase following the pandemic.

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The research found that overseas investors remain the most active buyers of Scottish commercial property, accounting for 53 per cent of investment volumes. UK property companies increased their investment levels from £312m last year to £518m in the latest nine-month period.

Investment volumes in Aberdeen more than doubled from just over £54m in the first nine months of 2021 to £116.9m, buoyed by the sale of two retail parks. Edinburgh saw investment volumes increase 24 per cent to £415m, while Glasgow increased by 6 per cent to £377m.

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Alasdair Steele, head of Scotland commercial at Knight Frank Scotland, said: “There has been a great deal of uncertainty this year, starting with the complications of the ongoing pandemic, the conflict in Ukraine, and rising inflation and interest rates, but Scotland’s commercial property market has continued to fare well. This is particularly true for assets that are in high demand, namely prime offices and industrials – but alternatives, particularly hotels, are increasing in popularity.

“The summer period was relatively quiet after a flurry of deals were completed in the lead up to June. However, as we move into the final quarter, there remains a significant amount of dry powder waiting to invest and commercial property is traditionally seen as offering a good hedge against inflation – particularly for overseas investors, with the pound’s current weakness. We could see them take an even more active interest in the market in the remainder of 2022 and into next year.”

He added: “We anticipate a busy end to a challenging year, provided the macro-economic situation does not change materially and the right stock is made available.”

By Scott Reid

Source: The Scotsman

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Bank of England to suspend market operations for State funeral

The BoE said CHAPS will be closed on 19th September, in line with its normal bank holiday arrangements.

CHAPS handled around 174,000 payments each day, in the year to February 2021, with an average payment value of £2.1m. That works out at around £367bn each working day.

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CHAPS is used by banks and large corporations to settle high-value money market and foreign exchange transactions, by companies to pay taxes, and by solicitors and conveyancers to settle property transactions.

The Bank’s Real Time Gross Settlement (RTGS) service, which underpins large transfers between bank accounts, will also be closed.

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Back in 2014, RTGS collapsed for most of a day, putting thousands of housing market transactions on hold.

Last week the BoE said the sale of corporate bonds held by the Asset Purchase Facility will be delayed by a week, to 26 September, following its decision to delay its next interest rate decision by a week (to 22nd September).

Source: London Loves Business

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I could have fixed my mortgage rate for years longer. I’m a fool

I have been having flashbacks. Not the kind I used to have, of when I went hiking in Yosemite National Park without a map and ended up sliding down a bear-infested trail on my backside in the dark. No, these flashbacks relate to a time in my more recent life, and an ill-fated conversation with my mortgage broker in July last year that led to a severe financial misjudgment.

My wife and I had just sold our house while juggling careers and three small children, and it was time to choose a mortgage for the new one. Should we take a two-year fixed-rate deal or a five-year one?

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The five-year mortgage was with Santander, and the two-year with the West Brom building society. Both had interest rates of just over 1.2 per cent, and our broker pushed for the two-year deal. The Bank of England base rate was 0.1 per cent, and he said he would be stunned if the base rate or mortgage prices went up significantly by summer 2023, when we’d be due to renew. Plus (and after this week’s 0.5 percentage point rate rise, this is makes me squirm the most) he reckoned being stuck with a five-year deal and its hefty early repayment charge was the riskier option.

The clincher was that the West Brom would lend us £40,000 more than Santander would because it had a more relaxed affordability calculation, and we wanted that money — the place needed some work. It was an interest-only mortgage, which appealed because the repayments would be low while my wife was temporarily out of work. The two-year deal it was.

Fast forward a year and . . . yes, I know, I’m an idiot.

Since we took out our mortgage the base rate has risen six times, now sitting at 1.75 per cent. It is heading in only one direction, and could be as high as 3 per cent when our two-year fix term ends.

Lenders, of course, follow the base rate when setting their rates. According to the data firm Moneyfacts, the average two-year fixed-rate deal has gone from 2.55 per cent to 3.74 per cent since we took out our loan, and the average five-year fixed rate is up from 2.78 per cent to 3.89 per cent. Next summer we may be offered 4 per cent, which could mean paying £1,000 more each month than we do now.

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So what can we do about it? Work is about to begin on the downstairs of our house, and it’s becoming ever more expensive because of inflation — we’ve now scaled back our plans and are leaving a tumbledown garage in place. We’ll mitigate the impact of our bigger future mortgage payments by setting aside money each month, and perhaps overpaying on our existing deal. We’ll burn through our savings.

However, for many borrowers coming off fixed rates next year, the prospect of a deal at a much higher rate is going to trigger a “payment shock”, as the broker Andrew Montlake puts it. Of course, at this time of pandemic, war, rising inflation and heatwaves, planning anything is difficult — from when to remortgage to how often to water the garden. I’ll be far from alone in facing nasty flashbacks over the coming months.

By DAVID BYERS

Source: The Times

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Knight Frank: Scottish commercial property investment hits pre-pandemic levels in first half of 2022

Scottish commercial property enjoyed its best first half of the year for investment volumes since 2018 as the market continued its recovery from the Covid-19 pandemic, according to new analysis from Knight Frank.

The independent commercial property consultancy found that £1.2 billion of commercial property deals were agreed between January and June 2022, up 54% on the same period last year. The figure is also 21% ahead of the five-year average – albeit, this was skewed by low investment volumes during 2020 and, to a lesser degree, 2021.

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Overseas investors represented more than two-thirds (68%) of the total investment figure, equivalent to £843 million, with UK property companies the second most active buyers totalling £296m – 23.9% of overall investment volumes.

Investment in retail assets increased by more than 55% on 2021, rising from £148m to £230m with retail warehousing accounting for £165m of the total figure. Offices were the most popular asset class with £410m worth of deals, boosted by the sale of HFD Group’s 177 Bothwell Street in Glasgow, in what is believed to be a record transaction for Scotland.

Edinburgh saw £400m of investment, while Glasgow accounted for another £329m. Deal activity in Aberdeen continued to pick up, reaching £189m, largely from the sale of two retail warehousing assets.

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Alasdair Steele, head of Scotland commercial at Knight Frank, said: “The first half of the year has underlined a couple of key trends that have emerged over the last two years: retail warehousing and industrials remain in high demand, while prime offices are highly sought after – underlined by the deal for 177 Bothwell Street.

“Similarly, overseas investors accounting for such a high share of investment during the last six months also highlights the strength and depth of the buyer pool for Scottish commercial property.

“An uncertain macro-economic outlook will likely cool deal activity over the next couple of months. However, commercial property has typically acted as a hedge against inflation for investors and, with yields in Scotland’s main cities comparatively good value and supported by strong occupier markets, we expect interest to remain strong in the second half of the year.”

Source: Scottish Construction Now

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Foreign owners hold £90.7bn worth of property in the UK

Overseas nationals own almost 250,000 homes across England and Wales, the latest research by London lettings and estate agents Benham and Reeves shows.

In the current market, that is £90.7bn worth of property, suggesting that the UK remains a safe haven for foreign homeowners.

On a regional basis, London is home to the highest value of foreign owned homes, with the 85,451 properties belonging to overseas homeowners equating to a total value of £45.3bn.

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Westminster ranks top, with foreign owned homes commanding a current market value of £11.8bn, while in Kensington and Chelsea this total sits at £10.7bn.

Tower Hamlets ranks third, although some way off the top two, with overseas homeowners sitting on £3.7bn worth of property, followed by Wandsworth (£3.3bn) and Camden (£3.2bn).

Outside of the capital, Buckinghamshire is home to the highest value of foreign owned homes at £31.1bn, while Tandridge (£1.6bn), Liverpool (£1.4bn), Salford (£1.1bn) and Manchester (£1.1bn) also make the top 20 list.

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Director of Benham and Reeves, Marc von Grundherr, commented: “It’s not just domestic homeowners who have benefited from some extreme rates of house price appreciation in recent years and despite attempts to deter foreign interest, the value of homes owned by overseas buyers remains considerable, to say the least.

“While London is home to the highest concentration of foreign owned property market wealth, it’s certainly not confined to the boundaries of the capital alone, and overseas buyers remain an important segment of the market across England and Wales.”

By MARC DA SILVA

Source: Property Industry Eye

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Property market investment is crucial to economic recovery

The past two years of economic uncertainty, induced by the global pandemic, have impeded strong performances across most industries. Certainly, all will be glad to see the back of the restrictions and lockdowns that strained growth as businesses seek to recover.

Yet, amongst the volatility, the UK property market once again flourished, highlighting the sector’s reliable reputation in such times.

This resilience was likely made possible by investors seeking financial opportunities that have been historically more reliable during a period where other potential assets have not looked as secure.

What’s more, there appears to be no slowing down, with buyers snapping up property faster than ever, twice as quickly as they did in 2019, according to data from Rightmove.

Alongside thriving market activity is the rise in house prices that continued surging even throughout the pandemic. According to Nationwide’s April House Price index, average house prices have reached £267,620, with price rises increasing higher than 10 per cent in each month but one in the past year.

Despite positive growth, the industry must remain prepared for potential challenges ahead. The rate of buying is a consequence of a shortage of property, a situation that cannot continue forever. And pundits have predicted house prices to be pulled back down by the cost of living squeeze and rising mortgage rates.

This is why many will be hailing the return of international investors since the end of Covid restrictions at the start of the year.

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Why is overseas investment important?
The health of the economy and the health of the property market are closely linked. Consumer spending and borrowing are affected by house price increases or dips. As such, receiving overseas investment will be crucial for maintaining the growth of the market and, in turn, the UK’s economic recovery.

And judging by the figures, this is anticipated to be the case since travel restrictions into the country were dropped in February.

According to Knight Frank’s City Wealth index section of their 2022 Wealth Report, in 2021 London saw more cross-border private capital in real estate than any other city in the world, with more than $3bn (£2.39bn) invested. Their forecasts estimate this trend to continue over 2022, with a further $24bn expected to be invested in the capital.

When taking into account the ongoing housing crisis that desperately needs to be tackled, a significant boost in investment would be welcomed in order to address the vast undersupply in housing.

To offset the shortage, the UK needs to be building 340,000 new homes a year, of which 145,000 should be affordable. However, only approximately 216,000 new homes were supplied in 2020-21.

More often than not, news of international investment flows into the UK property market is met with some disdain due to negative connotations linked to the housing shortage. However, foreign investment can ensure the commencement of property development by buying new residential units off-plan and funding development schemes.

This is a huge positive when considering the slowdown of construction activity due to problems associated with the pandemic.

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It is not just the capital where these projects are taking place. International investors are placing bigger bets on areas outside of London such as the West Midlands and the North of England, with the likes of Manchester, Leeds and Newcastle becoming recognised as better value for money investments.

At the same time, investment in regional areas has been bolstered by a change in homeowner preferences. Many households are now seeking bigger homes outside of the city, suited to home-working needs, and increased investment flow has the potential to boost their development of new housing for years to come.

Could external factors delay international investment flows?
While the return of international investment is certainly promising for the property market, it is important to recognise the wider macroeconomic headwinds that have the potential to slow down the market’s growth outlook.

For one, the steady climb of interest rates poses added challenges to investors.

The base rate, which recently rose to 1 per cent, influences the interest rates that many lenders charge for mortgages, loans and other types of credit. For investors, this means taking into account higher mortgage rates in line with rising interest. This in turn poses risks to the pace of real estate development.

Elsewhere, there is soaring inflation and a cost of living crisis to contend with. The Bank of England has warned that prices might rise to 10 per cent this year, a 40-year high, and this jump in inflation coupled with the rising interest rate could erode rental returns and devalue property if house price growth slows, which commentators are anticipating.

However, despite the above, UK property has long been considered a safe bet for international investors, and it is unlikely this will change any time soon. Capital from areas such as Hong Kong, China and the US remains strong. Also, the drop in the pound since Brexit has allowed for more favourable exchange rates that stretches investors’ money further.

Looking ahead, it becomes essential, then, that the expected return of global investment flows is used to its full potential. Doing so will be key to ensuring the continued strength of the property market and, ultimately, the pursuit of a steady economic recovery.

Jamie Johnson is chief executive of FJP Investment

By Jamie Johnson

Source FT Adviser

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Hong Kong developers are betting on London for its high rental yields amid BN (O) visa scheme, says K&K Properties boss

Hong Kong developers are increasing their investments in London, betting on higher yields as more Hongkongers head to the UK under the British National (Overseas) visa scheme.

There has been a surge of Hong Kong money going into the UK’s property markets in the last two years, according to Kino Law, chief executive officer and chairman of K&K Property Holdings.

This is probably because of the British capital’s higher rental returns compared to other gateway cities, and the relaxation of immigration policy for BN (O) passport holders, he said.

“The trend is [mainly] due to diversification and to create a more healthy investment portfolio to help the developers to fund their projects and create a more healthy balance sheet,” said Law.

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“Hong Kong developers, from my perspective, always very [much] have an international and global perspective.”

Hong Kong developers that have invested in London included Sun Hung Kai Properties, CK Asset Holdings, New World Development, Link Reit and Far East Consortium.

BN (O) status was extended to Hongkongers born before the city’s handover to China on July 1, 1997. As many as 5.4 million Hongkongers, including their dependents, are believed to be eligible for the BN (O) visa scheme.

Under the programme, people from Hong Kong can apply for an initial visa lasting up to five years to live, work and study in the UK. The visa scheme, introduced following the imposition of Beijing’s controversial national security law for Hong Kong in June 2020, allows for an easier path to British citizenship.

K&K has a portfolio of properties in London’s West End worth about HK$4 billion (US$513.6 million). Law sees this potentially expanding by about 50 per cent over the next five years.

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The developer recently made its fourth acquisition of landmark commercial property in Central London within the last two years. It paid £66.1 million (HK$697 million) for 15 Adam Street, an office building with a retail component.

K&K’s London portfolio has an overall occupancy rate of 93 per cent. Most tenants are international firms and tech companies.

The London portfolio currently generates £17.3 million in rental income each year, Law said. That translates to a yield of 4.6 per cent.

In comparison, commercial assets in major European cities are trading at around 3 to 3.5 per cent, while those in Hong Kong and Singapore are trading at 2.5 to 3 per cent, he said.

The West End – traditionally London’s theatre district – has attracted a number of tech start-ups as well as established international players in recent years. Google just bought its second headquarters there, next to Endeavour House, which belongs to K&K, Law said.

Office leasing inquiries in the area have increased 20 per cent in the last two months, as the Covid-19 situation improved, Law said.

He also believes there is a currency benefit to investing in the UK. The pound sterling is “trading well below the long-term average”, with a “15 to 20 per cent upside”.

The biggest obstacle to the first of K&K’s acquisitions in London was lack of credibility, said Law.
“The local UK market just didn’t know us well enough to trust us,” he said. “When we first purchased Orion House in 2019, I was thankful that I met the managing director from [the largest specialist Central London office fund] Welput in London and he believed in us enough to complete the transaction.”

The Hong Kong market will continue to be K&K’s main focus as it continues to participate in the government land sale market, said Law. K&K’s commercial investment portfolio in the city is worth about HK$7 billion.

“In the next five years, we aim to reach total assets under management of HK$20 billion, with an asset allocation of 30 per cent overseas investment and 70 per cent Hong Kong investment,” said Law.

By Lam Ka-sing

Source: SCMP