Property is set to be at the centre of large scale investment in the UK from China, according to a report published this week in the Financial Times.
According to Pinsent Masons, China is set to put around £105 million into the UK economy, with the spend on infrastructure set to take place on a gradual scale between now and the end of 2025. It comes after the country already invested almost £12 billion between 2005 and 2015, which included the China Investment Corporation, the sovereign wealth fund, buying a ten per cent stake in Thames Water.
Richard Laudy, a partner at Pinsent Masons, described the prospect of greater Chinese investment as a “game changer” for the UK, saying: “We expect this to be the beginning of a major trend as a trickle of Chinese investment turns into a wave over the coming decade.”
The UK is expected to be seen in a new Chinese report as the third most attractive nation in the world for investment from China out of 144 ranked, coming behind only the US and Japan.
Property has always been an important consideration for Chinese investors, and this has already been shown this year, with a large chunk of the £2 billion spent to date having gone on commercial property. Sanpower’s $790 million investment in April into House of Fraser and the $187 million real estate investment by China Construction Bank into Old Broad Street in the City of London were the most significant of the year so far.
So what can Chinese investors bring to the UK property market? According to Mr Laudy, the best trait of those from China with money to spend is that they are not afraid to put their funds into new-build properties, which could help challenge the supply and demand issue.
He pointed towards the billions of renminbi spent in the last few years across infrastructure projects in Africa and eastern Europe as examples of where Chinese investors are inclined to spend billions to win construction opportunities.
Any money coming into the UK from China could also see a boost for British construction companies, with Chinese firms frequently forming alliances with native companies as a way into the market without the barriers that may otherwise exist. This has already been seen in Beijing Construction Engineering Group’s partnering with Carillion, the British construction company, on the £800 million Manchester City Airport project, one of the largest Chinese investments in Britain to date.
So far, the majority of investment that has come into the UK from China for property has been for existing and established stock that offers safe returns, so this will be a welcome change if new construction becomes an important part of their future plan.