St George Welcomes the Dragon – Why Asian Money is Breathing Fire into Brexit Britain

UK-based firms, particularly estate agents doing business with Asian investors, are witnessing an epic surge of capital inflow into Britain. As the clock ticks down towards Prime Minister Theresa May’s deadline of the end of March for triggering Article 50, and the beginning of the country’s withdrawal from the EU, Far Eastern property speculators are rushing in to stake a claim in the UK’s future.

The fall in the value of Sterling means that bricks and mortar assets are some 15-20 per cent cheaper than they were prior to the referendum last June, and big money, especially from China and Singapore, is making a major impact on the housing market as a result.
Initial panic after the historic vote saw Singapore’s United Overseas Bank suspend mortgage lending on UK properties, while investment firms including Canada Life Insurance closed down British-focused property funds. Confidence soon returned to the sector, however, as the world adjusted to the new reality. Donald Trump’s election only served to confirm the changed global mood, as “President Brexit” expressed his belief in the merits of British independence.

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The roof is on Dragon fire

Demand for London property, already through the roof, is expected to remain sky-high for the foreseeable future, thanks to a fast-growing population and a cautious national building strategy, making medium to long-term investments attractive for the new wave of “tiger landlords.”

Recent rumblings from Brussels about a “special relationship” between London and the troubled continental bloc suggest that London’s position as the foremost centre of global finance will continue. Confirming their faith in Britain’s international standing, Asian investors spent £4.6 billion on property in Central London locations in 2016, around a third of the total volume, and an increase of 5 per cent on the previous year.

Leaving aside commercial investors, private buyers fall into two main categories. There are those who are content to live abroad and are attracted to buy-to-let properties in student cities such as Manchester and York, where rental yields can be far higher than elsewhere.

There are also those intending to reside in the UK, who are drawn to Britain for a number of reasons including education, lifestyle, prestige, and security against potential devaluation of the yuan. These individuals are most usually members of China’s entrepreneurial middle class, which continues to grow exponentially.

As such, they bring with them new opportunities for British companies involved in real-estate and import-export with the Far East, as long, of course, as they are able to take advantage of rapid changes in exchange rates. Covercy, licensed and regulated by the UK FCA, provides exchange rate certainty as it guarantees the rate on international bank transfers. This in turn assists businesses and individuals to be less affected by the exchange rate and save some money in the process.

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Is this expected to continue?

However, the window of opportunity for Asian property buyers may not be open indefinitely. One of the Brexit debate’s most explosive dimensions was continuing high levels of immigration, both from within the EU and from further afield. Public and governmental attitudes towards the buy-to-let residential market have also been hardening in recent years, with native Britons finding it increasingly difficult to get a foot on the property ladder.

The cause of the problem has been frequently attributed to foreign buyers, and London Mayor Sadiq Khan announced a major inquiry into the issue last September.
As a result, although the UK is likely to remain very much open to foreign investment in the commercial sector, individual private investors, including those from Asia, are sensing that they must act fast or miss the boat.

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