Eastern Promise

Towards the end of the last century, I knew a young agent who covered Soho. Sales were good, as he had this one, incredible client. This serial purchaser, called Larry, would buy almost anything from my friend, pay the asking price, and never needed a loan.

Larry wasn’t a Soho habitué. He crossed Shaftesbury Avenue to view places. Larry was based in Chinatown, was a Chinese national, and was investing Chinese capital. Back then, in the go-go nineties, when China’s annual growth rate was climbing towards 10%, a huge amount of spare money was coming Larry’s way. My friend couldn’t quite believe how much of it was being passed onto him, by this ambitious, international investor.

Today, China’s economic might is a commonplace fact of life, and the practice of the world’s wealthy putting their wealth into bricks and mortar many thousands of miles away is quite normal. In July and October of last year, China’s Insurance Regulatory Commission lifted regulations on the amount of international property its insurers could have in their portfolios, allowing the firm Ping An to buy London’s iconic Lloyd’s Building.

The Commission also listed the places where these investments could be made, which not only included major cities in 25 ‘developed markets’, but also 20 emerging economies such as Brazil and India too. So, while the Larrys of this world are welcome in our capital, they’ve also options elsewhere too. The Brazilian market, where residential property prices in big cities like Rio and São Paulo have risen annually a little over 7% (or a little over 14% if you include the country’s strong inflation rate), looks likely to bubble higher, thanks to recent regulation changes, allowing workers to tap into their state-run unemployment insurance fund to buy homes worth up to about £200,000.

Closer to home, investors are reconsidering central and eastern Europe, in relatively stable countries such as Poland. There, levels of transactions have almost returned to pre-2007 peaks. And, if quality of life were more important to Larry than climbing prices, he might buy in Melbourne, which topped Economist’s Intelligent Life liveability scale earlier this year, or Copenhagen, which Monocle mag decided was the best city to live in.

And yet, London, it appears, is still calling. With slackening growth in the Chinese economy, domestic investment returns aren’t as attractive as they once were. What’s more, a rising Chinese Rembini and a falling pound, it is becoming ever cheaper for Chinese investors to buy in Britain. China’s state-owned Global Times paper reports that China’s offshore real estate investment has exceeded $5 billion so far this year, and that it isn’t all massive insurers buying office blocks.

“Most of our Chinese private clients prefer properties sold at around £500,000 per unit in London,” Paul Bennett, international business development director at UK development firm Berkeley Group, told the paper.

£500,000 doesn’t buy you a landmark block in The City, but it would get you a pleasant flat off the Fulham road. And that is as attractive an option when viewed from Shanghai’s Bund as it is from the streets of SW6.

Words:
Alex Rayner
London Based Journalist