The rich historical connection between Hong Kong and Great Britain has meant that the UK has long proved a popular emigration and investment destination for HK nationals. Interest has increased significantly in recent years as the political climate in Hong Kong has evolved. This appetite was accentuated further still by the announcement that the UK is to offer a path to citizenship for the nearly 3 million Hong Kongers who hold British National Overseas status. It is estimated that some 300,000 HK nationals will utilise this route to emigrate to the UK. Indeed, in the nine months following the announcement, it is estimated that Hong Kong buyers purchased over £959 million ($1.3 billion) worth of homes in London* alone.
As China extends its influence on the city, more and more Hong Kongers are betting that the prospect of having at least a foothold in the U.K. will prove an advantage.
What are the 5 key tips for Hong Kong buyers looking to investment in the UK property market?
For those in Hong Kong considering buy-to-let investment, researching potential city locations is the first step. Whilst London has historically been the default location of choice, the price rises of the past two decades have meant that rental yields in the capital are now relatively low when compared to key regional cities. In contrast, house prices relative to Incomes in high growth locations, such as Birmingham, offer high yields and substantial head room for future price increases.
Therefore our first tip is to consider regional city locations undergoing regeneration, inward investment, job growth and infrastructure expansion.
2. How to Invest
We believe purchasing off-plan is the most convenient option for Hong Kong buyers. This refers to the process of buying a property before it is built. We suggest this as purchasing completed housing stock can pose a number of challenges. Firstly, purchasing an existing property can be a highly competitive process. You may find the price of quality properties is bid up by local home buyers. Secondly, buying a completed property can be a time consuming process. Your purchase may be dependent on a ‘chain’ whereby the individual selling the home in question has to wait before they are able to exit the property. Finally, the property will invariably require maintenance and refurbishment – again consuming your time and money. Whereas off-plan property investment is a seamless process. You can select the development and plot you are interested in and Reserve the property easily. On completion you receive a brand new apartment with the benefit of appliance and construction guarantees.
For the sake of convenience, efficiency, and cost we recommend Hong Kong buyers consider off-plan properties over existing housing stock.
3. Asset Liquidity
Third on the list of our 5 Tips for Hong Kong Buyers Looking to Invest in UK Property: Many Hong Kong buyers are in the fortunate position of having substantial sums of capital on hand to invest. When searching for high yielding property investment options they may encounter brokers and agents offering property associated alternative investments such as hotel rooms, student ‘pods’, car parking and so on. These ‘alternatives’ often feature high headline yield figures which may prove compelling. However, we encourage buyers to invest in residential property. We recommend this as a property that can be sold on to a future home buyer is a liquid asset. A property that can only be sold to another investor is relatively illiquid.
For Hong Kong buyers seeking to maximise their returns, they should seek out residential property assets with the broadest appeal to potential future buyers.
4. Mortgages for Hong Kong Nationals
Hong Kong buyers considering UK property investment can leverage their capital by purchasing with a buy-to-let mortgage. It is a common misconception that there are no mortgage products available to HK investors, this a perception perhaps created by the standard product offering of mainstream banks. Hong Kongers should speak with specialist mortgage brokers, such as our own in-house Mortgage Manager, to assess the Loan-to-Value and interest rates available to them. We routinely help Hong Kong buyers secure btl mortgages to complete their property purchases. HK clients should expect to place a total deposit of 35% of the property value in order to secure mortgage financing.
Therefore our tip is to advise that Hong Kong buyers can secure mortgage financing, and that they ought not be put off by advice given by retail banks that have little experience in this specialist lending market.
5. Reliable Rental Management
For HK Nationals investing in UK property, sourcing a reliable Lettings Management partner is crucial. This will mean your property is well managed and maintained, and that your tenant is cared for on your behalf. Whilst the UK property industry is well regulated, there are still significant differences in quality of service offered by Rental Agents. As one of the largest private property developers in the UK, Prosperity Developments understand how essential this relationship is. So much so that we established a Lettings Management business, Lamont & Co., to guarantee a consistently high standard of service for our investor clients.
We recommend buyers conduct careful due diligence before selecting their rental management agent. It may seem that this is a homogenous service and therefore you can default to the cheapest option available, our experience suggests that this is not the case.
So those are our 5 Tips for Hong Kong Buyers Looking to Invest in UK Property. In conclusion, UK property continues to represent a fantastic opportunity for Hong Kong investors. We at Prosperity Wealth and Developments have substantial experience in helping HK nationals with their UK property purchases and would love to work with you to help you achieve your portfolio goals.
Content by Samuel Richards