Could the East provide the boost that UK real estate needs right now?

In light of the challenging market conditions in recent months, many corporate agencies are having to let go of their staff or close their premises. Difficult times make any possibilities of transactions look bleak. However, there is still some movement in the real estate market, for those who are actively involved. Leaving the portal worries and barriers aside, the property market remains attractive for overseas buyers. The primary driver for this has been the weaker Sterling which has been further emphasized with the arrival of the COVID crisis in the UK. This favourable shift in currency combined with attractive funding costs and mortgages available at rates as low as 0.8%1, it’s no wonder that there is an opportunity.

With China on the road to recovery and accounting for less than a tenth of worldwide coronavirus infections and barely any of the new daily cases, life is starting to return to somewhat of a normal. Businesses are gradually getting back to work; Small and medium-sized enterprises nationwide had resumed work at a rate of 76.8% (as of March 292). 

The UK has always been a global target for Chinese buyers, with London being the top destination for Asian outbound capital in 2018, according to CBRE in last year’s report. The fact that Chinese buyers in the UK rose from 2.5% in 2016 to 20%3 in 2019, is a good illustration of this trend. As long-term investors, Chinese buyers are attracted to the UK based on strong fundamentals of the British economy, a well-developed judicial system as well as globally ranking educational institutions amongst other factors. With this outlook in mind, these buyers are less sensitive to any short-term economic or political uncertainty that may arise. Instead, this proves to be an opportunity to secure real estate in areas with strong growth potential.  Again, to illustrate, in 2018, 18% of total outbound investment targeted London, which was increase from 13% in 2017. 

With limited activity in the Asian markets over the last 3 months, they’ve had a lot of time to interest shop, with certain schemes seeing up to a 50 to 60%4 increase in East and West London.  With overseas purchases looking attractive at the current depressed levels, the only barrier is how do you get access to this international demand? XChange by houzen is a prop-tech that emerged to help break those international barriers way before COVID-19 emerged. For the past 3 years, they have been partnering with Independent Agencies to open their horizons and portfolios to international demand. In 2019 alone, 60% of all successful transactions were from international applicants from China. Most of which viewed the property through WeChat or Virtual tours and made the decision all before even landing in the UK.

Megan, XChange’s China Market Lead who works mainly with Chinese applicants based in Chine and in the UK. She says “There’s still a high demand for property viewings, however, we switched in 70% of cases to virtual viewings, by video call and WeChat. Most of the applicants don’t have a problem viewing a property this way and are comfortable making their decision just based on that. In terms of how many people might actually arrive in the UK later in the year, I see a potential for a spike in the number of international students moving to the UK.” Megan adds: “Some universities lowered their required grades for Chinese applicants, so if the situation with coronavirus gets better soon, we might see an even higher number of incoming students later on”

We also spoke to Credo, a leading Chinese relocation agent and asked their views on the outlook of the real estate market. 

“Although we were indeed concerned about Covid-19’s impact on Chinese students and young professional going abroad, once April to May rolled around, it gave us lots of confidence that the demand is still there and even stronger – as for them it’s about international education and a long-term life goal instead of this temporary lockdown situation.

“With positive feedback from our local channels that the number of Chinese who applied for, or have received offers from UK universities has exceeded the same time over the last few years, we believe the renting demand will start to rally later this summer. If the market is so active this year during pandemic time, we could not be more optimistic about the demand from China in the future.”

With the ongoing restrictions on the market, XChange is opening its doors to bigger agencies to support the market during this time. By providing the means to easily connect with the Asian market, there is room for the business to be done. 

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