Asian investors return as UK property market recovers

In the wake of the coronavirus pandemic and Brexit, the UK property market is emerging as a new normal, with a resurgence in popularity as a destination for capital investment from Asia.

Ian Hindo
Ian Hindo

Property adviser Knight Frank’s annual London report, published in February, said £4 billion (US$4.6 billion) will be invested in the London office market in 2022. Hong Kong, Malaysia, Mainland China, South Korea, etc. £4 billion is almost double the amount of capital from the region last year.

“That investment has slowed during the pandemic, but the reason may be more pragmatic than due to negative perceptions of the market — travel restrictions — meaning buildings are becoming more difficult to inspect. , certain investors have become reluctant to invest large amounts of capital in real estate assets they have never seen before,” said Iin Hindhaugh, real estate partner at Addleshaw Goddard in London. Asia Business Law Journal.

“Now that travel restrictions have eased, trading activity by international investors has increased.”

Linda Jacks

Linda Jacques, partner at Lester Aldridge Solicitors in Southampton, agreed that most of the Asian investment in UK property is due in particular to London’s booming property market.

“The real estate market was very hot before the pandemic. “Overall, the UK is very open to investment from all over the world because it doesn’t put up many barriers, and the government gives incentives for companies to come to the UK, and taxes are so high that new companies can It’s very easy to open.It’s good here.”

While the broader global political and economic outlook still raises concerns, Hindhaugh sees opportunistically that he may be seeing a slight shift in recent months towards a buyer’s market with opportunities to create value. Demand from investors remains, he said.

An example of this is Lembaga Tabung Haji (TH)’s acquisition of the Ministry of Transport building at 33 Horseferry Road in London for £247.5m. TH is an Islamic institution that provides facilities such as banks to Mecca pilgrims in Malaysia and also manages investments.

“Market fundamentals remain strong, tenant demand is returning despite recent work-from-home trends, and employers are looking forward to supporting the competition for talent and shifting priorities in their talent pools. We are looking for a higher quality building,” says Hindhaugh.

But Hindhaugh said one of the key legislative changes international investors should be aware of is the Economic Crimes (Transparency and Enforcement) Act 2022, which came into effect in August for all practical purposes. I warned you.

Most overseas companies acquiring UK property are required to register with Companies House and provide beneficial owner details. This also applies to existing property owners who must register by January 31, 2023.

The legislation aims to increase ownership transparency in the increasingly politicized UK property market. The dispute in Ukraine has resulted in questions about who actually owns British property and how much has been acquired using illicit capital.

“In the past, many offshore companies were able to acquire UK property and the ultimate owners of those offshore companies were largely hidden behind various trust structures. The use of companies from the British Virgin Islands (BVI), a highly sensitive jurisdiction, was also hidden, such as Cayman,” said Hindhaugh. “In particular, the BVI has always [property] Acquire companies from the Asia-Pacific region. “

Leicester Aldridge’s Jack said most of the investment is going to London and the South East of England, so the government is trying to encourage investors to look beyond those areas.

Jack said the government’s leveling-up policy is aimed at diversifying financial assets across some of the countries that may be slightly behind.Scotland, Wales, Northern Ireland and North East England. One region is very keen for governments to confirm investment flows.

“Buzzword or not, there is no doubt that the focus is on increasing investment in these regions as a result of the big push for Leveling Up,” said Jacques. “The UK is very keen to attract all investment, especially in technology, but I think everything is possible in all areas.”

In terms of policy developments, Jack believes the government is increasing powers to oversee investments, mergers and acquisitions of certain companies through the National Security Investments Act of 2021, which took effect on January 4. .

The law allows the government to screen companies seeking to control another company or assets in 17 sensitive sectors of the UK economy.

“There has been more focus on certain key and sensitive areas of business from 2021, but I think the UK is just catching up with the rest of the world with similar legislation,” Jack said. rice field.

The UK property market has been hit hard by the risk of a ‘no deal’ Brexit, which lasts until January 31, 2020, when the UK finally exits the European Union. At the same time, the covid pandemic was beginning to spread globally from Wuhan, China. Wuhan, China, has been under a community lockdown and travel restrictions for at least two years, straining its economy.

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