What Does China’s Investments In The UK Mean For Real Estate
Unless you have been living under a rock you know the financial power China yields around the world. In fact China is expected to surpass the United States as the world’s leading economic power this year. The majority of economists predicted that this would not happen for at least another five years. The point being that when a country hits the status of economic super power other countries reap the benefits as well and the UK luxury real estate market is no different.
Several things happen when countries hit the big leagues of economic powers but one of these things is the most important for real estate. The governments want to start creating relationship with other countries by providing products and services. This often takes the form in large corporations opening foreign divisions in the countries where they want to establish these relationships.
China recently closed several transactions with the UK that totaled about 10.6 GPB. These transactions covered all kinds of things from nuclear power plants, infrastructure and energy. A Chinese investment holding company was also created to invest in various UK corporations.
When foreign divisions are started there is often a major influx of buyers and renters in the area where the new division is started, which is typically major metropolitan areas. In most cases these will be highly paid executives and management. These will employees will be mostly interested in luxury real estate.
The question you may be asking is why luxury real estate. There are several reasons. First and foremost these corporations need to compensate their employees in other ways other than money for them living abroad. This often comes in the form of a nice monthly housing stipend or fully paid housing. Secondly, since many of these employees will be higher up executives and managers they are more than likely shrewd investors as well. They will see the opportunity to invest in real estate abroad and not pass up the chance. Finally, if you were going to live abroad for years on end away from your own home in a country you knew nothing about wouldn’t you want to live in a place that made you feel more comfortable?
It is difficult to estimate the number of new buyers or tenants that will flow into the UK real estate market and at what rate. However, it will still create a boon for those involved with the London luxury real estate market whether they be investors, property management or developers.
Smart investors already know what is about to happen to the luxury real estate markets. They have more than likely already been doing their research to discover the most likely places these foreign corporations will be setting up shop. From there they are doing their homework as to what the most likely places these foreign employees are going to be living. In fact they may already have several offers pending on prime real estate. Some of these investors are just going to flip these properties as demand pushes prices up. Others will just hand over the property to a management company that is poised to handle the housing for the inbound employees.
Property management companies that are worth anything should already be scrambling to get into contracts with the Chinese government and corporations. They should be expecting lucrative multi-year leasing agreements on luxury apartments and penthouses. In fact it is not uncommon for lease agreements to paid in full regardless of whether there is a tenant for the property or not.
Developers will also feel the mini-economic boom of influx into the luxury real estate market. As demand for luxury real estate in London increases this will provide a great opportunity to purchase and renovate apartments and other real estate.
The thing to keep in mind is that it will not just be luxury real estate either. One of the major projects will be a nuclear power plant in Somerset. This project will need thousands of workers from laborers, to office workers and management from all of the companies involved with the construction. The big question is where are all of these people going to live during the construction which could last between 3 to 7 years. Construction of a nuclear power plant will employ as many as 3,500 people at the peak of construction. I guarantee you that there is not enough housing in the area to accommodate for this many people.
This again proves the point there will be major opportunities in the UK real estate market with the Chinese investments and projects. Any real estate person regardless of whether they are investors, property managers or developers will start doing their homework right now to identify the opportunities this is bringing to the market.