London has been paying the price for Brexit for nearly five years as the uncertainty of the outcome had businesses leaving the UK for a headquarters on the continent. Many companies chose the UK because it is English speaking and has a stable legal and monetary system, while giving those companies full access to the European market under the single pan European economic zone.
But then those same businesses faced the prospect of losing access to the vibrant European market by virtue of having located in the UK, many businesses relocated to Amsterdam, Copenhagen, Belgium, and Germany. Real Estate prices in London predictably fell hard over the past five years.
Here we are in 2021. Real Estate prices are showing a surprising rebound. Is this the same artifact that we have seen during the pandemic where supply of homes for sale diminished significantly?
Throughout 2018, 2019 and 2020 we’ve seen one business after another relocate from the UK to other parts of Europe. Some of them relocated to Ireland which remained as part of the European Union. The UK is now divided with one foot inside the European Union and one foot outside.
Needless to say, there has been a flight of capital from England to other parts of the UK and to continental Europe.
For future for real estate in London looked bleak. Vacancies are up, and commercial vacancies have hit troublesome levels.
But then came China to the rescue.
You’re thinking wait, what? What does China have to do with England? How can China help UK real estate?
Since the new security law was enacted in Hong Kong in 2020, the central Chinese government has taken steps to eliminate dissent. Freedoms in Hong Kong that were taken for granted under British rule are disappearing. The new security law, under which at least 100 people have already been arrested, makes it easier to punish demonstrators and reduces Hong Kong’s autonomy. This month, 47 activists were charged with subversion under the legislation, after a mass arrest in early January.
Earlier this year, the Hong Kong government told UK citizens that they will need to choose between the having British status or Chinese status.
On March 11, the Chinese central government put another nail in the coffin of freedoms in Hong Kong.
But one thing is clear, people from Hong Kong have started arriving in London. They speak the Queen’s English and they are bringing investment dollars with them.
There has been a surge in interest in London real estate from Hong Kong over the past year.
According to Astons, Hong Kong residents represented the second-largest foreign buyer group in prime central London in the first three quarters of 2020. They accounted for 9.2% of foreign property purchases and spent an estimated £305.5 million across 243 transactions—or roughly £1.19 million (US$1.67 million) per property.
So far in the second half of 2020, property prices in London edged up about 17,000 pounds. That’s not a huge increase, but its a reversal of the previous trend over the past four years.
Pay close attention to geopolitical migration.