In the meantime it’s something that is having ramifications in the UK, with investors who had planned to put money into development properties in both mainland China and Hong Kong now looking across the water to the UK instead. Cities such as Manchester, Leeds, Sheffield and Liverpool are now on the radar more than before due to economic uncertainty.
According to an article in the Financial Times (FT), capital controls that have been introduced in China is stemming the flow of investment into Hong Kong and, as a result, has meant that property price growth is now slowing in the world’s least affordable residential property market.
According to economic analysts the ongoing trade dispute is damaging investor sentiment and isn’t expected to improve any time soon. Many of the developers that had, until recently, found it easy to sell their new developments may now find it difficult to find short-term refinancing.
In the past few weeks reports have come in of large developers slashing prices for new properties by as much as 12% in some cases, highlighting a growing and urgent problem. According to the FT, “Chinese developer Vanke’s stock has dropped 35 per cent from its high in January, while Country Garden is down about 46 per cent, and Sunac by about 36 per cent. Shares in Hong Kong developers Sun Hung Kai and Henderson Land have both dropped, by 18 per cent and 21 per cent respectively.”
According to CLSA, a Hong Kong based investment group, property prices have fallen a massive 4% in just two months. There is also concern at the debt levels of some of the biggest developers in China which could potentially spark a further collapse in prices.
Within that context it’s no surprise to see much more market activity from foreign investors in the UK. With prices continuing to grow, yields remaining strong and robust, and demand staying very strong, the urban markets in UK cities is proving very attractive.
Delloite’s latest crane survey shows activity in Manchester, for example, rising year-on-year with plenty of new developments being built across the city. The student property market has also seen a number of other cities increasing construction further with the likes of Sheffield and Liverpool following suit.
Given the volatility of the political situation between the US and China right now it’s hard to see the issue abating in the near future, and we’re more than likely to see foreign demand for UK off-plan property continuing to rise steadily over the coming years.
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