In a time of global unrest and economic uncertainty, affluent Asians are looking to established English-speaking hubs to invest in real estate
In an uncertain world, it seems to be one of the few things you can count on. Across the globe, in the face of (or perhaps because of) great swells of political turbulence, seemingly random acts of terrorism and the vagaries of the financial markets, residential property in prestigious international markets is being snapped up by wealthy individuals from China, Hong Kong, Singapore and the rest of Asia.
And it is the three leading global hubs of English-speaking commerce, culture and business –London, New York and Sydney – which have consistently caught the eye of the high-net-worth Asian property investor.
“These cities remain firmly on the radar for Asian investors and this has been the case for several years,” says Jonathan Gordon, director of international property investment firm IP Global, which has helped its clients invest more than USD2 billion across 30 markets worldwide.
There are sound, straightforward financial reasons behind London, New York and Sydney enjoying enduring popularity with Asian property investors, believes Gordon.
“The growth prospects certainly encourage investors to come to these markets. Our recent ‘Global Real Estate Outlook’ report shows that London prices are already up 10 percent since the start of the year. New York is only marginally behind with prices up by 9.9 percent compared to this time last year and Sydney has seen prices rise by almost a fifth (18.9 percent) in the last 12 months,” he explains.
“The financial security of London, New York and Sydney is the primary reason for investing in property at these locations.”
Harry Du, corporate partner in the Beijing office of international law firm King & Wood Mallesons, agrees. “Chinese investors do not have high expectation in investment returns nowadays, as it would be too idealistic in this economy. Instead, their main goal is to achieve financial security and safety by placing their investment abroad.
“London, New York and Sydney are metropolitan cities with buzzing markets of long-standing history. Their well-established reputation as financial hubs and cultural centres have made them very attractive and have instilled confidence in Chinese investors to make these three their prime locations for investment.”
However, there is more to the attractiveness of these three English-language powerhouses than simply hard cash, according to Gordon. “Even when returns have been lower in the past, Asian investors have not been deterred from investing in these major cities,” he says. “Investments have also been driven by social and cultural perceptions that London, New York and Sydney are sound and reliable locations.”
For some buyers, says Gordon, owning a home in a prestigious area of London, New York or Sydney, is akin to driving a car with a Bentley, Jaguar or Rolls Royce badge on the hood.
“Asians, particularly the Chinese, have consistently come back to these markets because of the prestige it brings to a portfolio,” he explains. “Having a property in a high-profile city, with global status, like London or New York, is a trophy that every investor wants on their books.”
Education plays its part, too. “London, New York and Sydney are popular destinations for Chinese students given their world-renowned education system and universities,” explains Du. “With the current trend of internationalisation, it has become more important for the younger generation in China to gain education qualification abroad to enhance their edge against fierce competition.”
With so many pluses, it is no surprise that there’s a lot of competition for high quality property. This, in turn, continues to drive up prices.
“Markets like New York, London and Sydney are becoming prohibitively expensive,” says Gordon. “For example, the competition from local buy-to-let investors means value is difficult to come by. The phenomena has been on-going in London and it is now happening in Sydney too, as even first time buyers are looking for that investment outside the city.”
Despite challenges, as long as Asian buyers continue to seek out property in London, New York and Sydney – and it seems likely they will – developers, vendors and governments will almost certainly bend over backwards to welcome them.
“London, New York and Sydney are benefitting greatly from Asian money,” explains Henry. “Each is a constrained market that has seen too little new development to meet demand, but Chinese and other offshore investors have spurred a wave of new construction, much of which is still to come online. This investment will transform these markets, creating new supply and moderating price rises.”
Time to take a closer look…