The battering of the sterling is causing a stir in Asia Pacific.
The news of Brexit is once again at the forefront of the news. Britain’s Prime Minister, Theresa May, has made moves to start the ‘divorce’ process of the UK from the European Union. She has triggered article 50 to commence the proceedings.
At the same time the sterling has been depreciating. This has created a surge of interest in Asia Pacific for those keen take advantage of the current economic situation. Real estate firm JLL have noted that prices that on average prices are 16 percent lower for UK commercial real estate since the referendum was announced in 2016 due to the currency changes.
Foreign investors have played their part in shaping commercial property in the UK for sometime. In 2015, they made up 48 percent of activity according to JLL. This rose to 51 percent the following year.
Hong Kong and Mainland China make up the vast proportion of interest. Head of UK Capital Markets at JLL Alistair Meadows commented, “We continue to see the emergence of Chinese capital globally. Chinese investors now rank just behind US as the second largest source of global cross border capital and we expect them to have an increasing influence on the UK market. Many investors from China and the wider Asia Pacific region are attracted to the depth, liquidity and familiarity of the UK market and come seeking diversification and safe haven forms of investment”.
Despite Article 50 being triggered, investors are not expected to shy away from London property. JLL report that many of their clients remain open to any arising opportunities in London. Some were quick to act and benefit from the more attractive prices on offer particularly as the strength of the Thai Baht has seen prices reduce by up to 20 percent.
It is expected that Chinese will experience between five and 10 percent return for their London commercial properties this year. The same figures apply for those from Singapore and Hong Kong. This has been calculated using projections on currency by Oxford Economics.
