Asian investors target UK real estate as sterling weakens post-Brexit

By Michael Lim / The Edge Property | March 31, 2017 10:43 AM SGT
As Theresa May triggers Article 50 to start the process of withdrawing from the European Union, the depreciation of the pound has spurred increased investment in the UK from Asia-Pacific and the Middle East, according to JLL.
The depreciation, coupled with the slight drop in capital values, has led UK commercial real estate to be discounted by 16% on average to overseas capital relative to pricing since the June 2016 vote, says JLL.
“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,” says Alistair Meadows, head of UK capital markets at JLL.
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The depreciation of the pound has spurred increased investment in the UK from Asia-Pacific and the Middle East, according to JLL.

Source: Bloomberg

Based on JLL forecasts and projections on currency by Oxford Economics, Chinese cross-border purchasers may enjoy returns of 5% to 10% if they invest in London office properties this year, after adjusting for expected currency movements. JLL says Singapore and Hong Kong investors are likely to enjoy a similar rate of returns.
Overall, overseas investors accounted for 48% of transactional activity within the UK market in 2015 and 51% in 2016, owing to currency fluctuations. The number of investors from Asia-Pacific and Europe increased from 2015 to 2016. In 2015, 17% of buyers came from Asia-Pacific and in 2016, the figure rose to 28%. The percentage of European-based investors rose from 14% to 23% in the same period.

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