The year, 1996, the phenomenon to get started, buy-to-let. What fuelled the craze of buy-to-let? Simply put, the introduction of mortgages which no longer required the borrower to live in the house they were buying with the said mortgage. According to The Economist, “investing in the housing market has seemed like a one-way bet, with prices trending upwards in real terms for four decades, mainly because government after government has failed to loosen planning restrictions on building new houses.” The Economist illustrates this growth in the chart below.
However, in 2018, the residential development experts of Blue Alpine see a changing landscape. There are signs that regulatory changes have begun to send the buy-to-let boom into reverse for domestic investors. But (you know there is always a BUT!), the Blue Alpine experts do see demand for buy-to-let among Chinese investors.
Our observation of the Chinese capital allocation to buy-to-let is backed up by an article written by Will Dunn from the NewStatesman. Will interviewed Carrie Law, CEO of China’s largest overseas property website called Juwai.com. Will’s conclusion is that Chinese investors continue to buy up swathes of property in the North. Blue Alpine experts found interesting that Carrie Law revealed: “In Manchester in January 2018, Chinese buyer enquiries were 255.6 per cent higher than in the same month a year earlier. In Liverpool, Chinese buyer enquiries were 160 per cent higher than in the same month one year earlier. Meanwhile, in London, enquiries were down 48.5 per cent that month on a year-on-year basis.”
It seems the “fuel on the fire” situation of Chinese investors flocking to British property continues due to the weak pound. In fact, the British pound fell to a 31-year low in the wake of the Brexit vote!
Carrie Law also said that “the weak pound is starting to look like the new normal and Chinese buyers are becoming accustomed to it. They no longer see it as a temporary discount, but a permanent condition.”
So, the question is…what are the Chinese investors looking to buy?
Law providing average buyer inquiry price data from Juwai.com, said that Chinese buyers are looking to spend £223,000 in Manchester. She continued to say that more than 80 per cent of buyers on the website listed investment as their motivation for buying a property in Manchester or Liverpool.
Law providing further data on the Chinese buyer profile said, “the share of Chinese buyers who say they intend to occupy their purchase is more than twice as high in London, at 52.7 per cent, than in Manchester, where it is 18.9 per cent.”
To conclude, Law states that “Manchester currently has the greatest dynamism and momentum in attracting Chinese buyers. It has gained buyer share quickly, while London has not.”
It is important to note that London remains popular with wealthier buyers. In Will Dunn’s article, he explains that the data shared from Juwai shows that Manchester and Liverpool and now the second and third most popular UK cities after London for Chinese buyers. Cambridge and Birmingham occupy fourth and fifth places, suggesting that cities such as Leeds and Newcastle have yet to appeal to Chinese investors.