China’s slowdown good news for the London property market

Last month all the talk was of China’s slowdown, its yo-yoing yuan, and the potential knock-on effect on the UK market. In particular, it seemed that getting a mortgage in the London property market was going to become more of a struggle. Not only were we told that the timeline of the base rate hike would be affected; according to the press the top end of the London property market, for so long the domain of international investors, was also going to be placed in jeopardy.

London dominated the global luxury property market in 2014. Knight Frank reports that 1,636 properties with a market value in excess of $5m were sold in the capital last year, compared to 796 in Manhattan and 596 in Hong Kong. With Chinese investors leading the way, many feared that market turmoil in Beijing would threaten London’s position as the world capital of luxury real estate.

The picture that is starting to emerge is very different. First Mark Carney poured oil on troubled waters with his assurance that events in China ‘do not yet, to my mind, merit changing strategy for returning inflation to target’. And now Jeremy Cook, Chief Economist at World First, has suggested that when the chips are down, Chinese investors are more likely than ever to turn their attention to the London property market.

‘You just have to look at emerging markets to see what’s happening there,’ Cook says. ‘They’re looking for safety, they’re looking for havens. They don’t want to be in bonds, they want to be in property.’

Investors are clearly worried by the situation in China, and in many places assets are falling on those worries. But the London property market is one place where some still spy an opportunity. Perhaps surprisingly, then, the patterns emerging amid the scaremongering spell good news. China’s slowdown and uncertain currency has only increased the number of Asian investors putting their money into London property.

Jeremy McGivern, Managing Director of Mercury Homesearches, believes this is a trend that will continue. ‘I think we will continue to see money coming in from China purely because there’s still huge amounts of money being generated,’ he says. ‘Yes, the growth is lower, but actually it’s from a much bigger base, and it’s actually slightly inconceivable the amount of wealth being created.’

Next year, work on the first brand new flats at what was once Battersea Power Station will be completed. Between that and the nearby Nine Elms development, there will be around 18,000 new properties in the area. Studio flats are expected to fetch well over a million pounds. Flying in the face of the doom and gloom we were told to expect, it seems there will be no shortage of buyers. Asian investors will continue to put their money into the top end of the London property market, in spite of and indeed because of China’s slowdown. For now, China’s pain is London’s gain.

What all this suggests to us is that the positivity we’ve detected in the capital is not misplaced. Far from a sense that doors are closing, there are plenty of opportunities still to be taken. It’s a particular boost for those thinking about getting a mortgage in the London property market at the moment. Such injections from investors inevitably reverberate into the mortgage market; lenders become more eager to lend and there are more options available to borrowers, all of which is excellent news for our clients.

As ever, if you have any concerns or would like to discuss your particular requirements, please get in touch with Enness.

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