Chinese investors pile into London property market

London’s commercial property sector witnessed a sharp surge in Chinese investment in 2016, driven by the weaker pound resulting from uncertainties over Brexit.

Chinese investors bought more than 3.15 billion pounds ($3.9 billion) worth of central London commercial assets in 2016, accounting for 22.5 percent of total central London transaction volumes, compared with their purchase of less than 1 percent in 2006, latest statistics by property broker JLL showed.

Commercial property, mostly office buildings, can generate more than 4 percent net returns for investors, according to estimates by Eric Zhao, an associate director and Chinese capital markets specialist at estate agent Savills.

Laurel Zhang, head of the China and Far East desk at the law firm Sherrards Solicitors, said her team has also noted a very strong Chinese appetite for UK property in 2016 from firsthand experience, which has continued very strongly into 2017.

Although Brexit uncertainties have led to some slight drops in property values, Chinese investors are still getting a bargain due to the depreciation of the pound, said Zhang.

The pound has depreciated more than 10 percent against the yuan since the Brexit referendum in June.

EricPang, director and head of the China desk at JLL, said the trend of Chinese investors buying overseas commercial property started in around 2011, led by sovereign wealth funds, insurance firms and institutional investors.

Pang said: “These investors are keen to diversify their asset base, and good asset accumulation they were experiencing in earlier years gave them further capability to invest overseas.”

In more recent years, private sector funds and investors and also property investment firms have followed to make investments too, Pang said.

Deals have continued into 2017. CC Land Holdings, a property-holding firm backed by Hong Kong property tycoon Cheung Chung-kiu, bought an office building in Paddington for 292 million pounds in January.

value of commercial properties bought in London by Chinese investors in 2016