Hong Kong’s uncertain political future has led to a wave of departures over the past 18 months, with cities from Los Angeles to Vancouver seeing an increase in demand for residential property from residents of the city. But as the pace of Hong Kong emigration accelerates, London is emerging as a clear favourite destination, with a spike in demand for investment property for sale London, especially among high-net-worth individuals.
The view is that while many global destinations hold a strong appeal, the U.K. property market provides a safe haven with a track record of stability and growth, states Arthur Sarkisian, a managing director at the investment immigration firm Astons.
Hong Kong began to experience unrest in the spring of 2019 when large-scale protests broke out against plans to allow extradition to mainland China. Despite the extradition bill eventually being withdrawn, pro-democracy protests carried on throughout much of the following year, until Beijing imposed a new national security law in June 2020.
The law, under which at least 100 people have already been arrested, makes it easier to punish demonstrators and reduces Hong Kong’s autonomy.
Since then, the U.K. government has announced a new visa system allowing millions of Hong Kong people to live and work more easily in the U.K.
The program, which took effect on January 31st, and applies to “BN(O)”—or British National (Overseas)—citizens as well as their immediate family members, provides a direct route to U.K. citizenship. The British government estimates that 5.4 million Hong Kong residents—or about 72% of the territory’s population—are eligible, and roughly 300,000 people are expected to pursue the scheme in the next five years.
Because of this, there has been a surge in interest in investment property for sale London from Hong Kong residents over the past year.
According to Astons, Hong Kong residents represented the second-largest foreign buyer group in prime central London in the first three quarters of 2020. They accounted for 9.2% of foreign property purchases and spent an estimated £305.5 million across 243 transactions—or roughly £1.19 million (US$1.67 million) per property.
In the fourth quarter of 2020, estate agent Benham and Reeves recorded a 63% year-over-year increase in foreign buyer demand from Hong Kong, and interest has only accelerated since. In January, it saw a 73% year-on-year rise in interest, and in February demand jumped by 200%.
According to Benham and Reeves, the vast majority of people from Hong Kongwho are interested in investment property for sale London are looking to buy residential property in anticipation of a possible permanent relocation. Some, who want to relocate their businesses as well as their families, have also expressed interest in commercial property.
All of this has supported London’s real estate market with house prices in the capital rising in response. The average house price in London increased by £17,144 between June 2020—when British Prime Minister Boris Johnson announced the BN(O) scheme—and December 2020, according to Benham and Reeves.
Marc von Grundherr, a director at Benham and Reeves, said most Hong Kong clients he meets are couples with one or two children, looking for two-bedroom flats. While he has had several inquiries with budgets up to £2 million, most are looking around the £500,000 mark.
They like the west and northwest because there is quite a big Chinese community, remarked Mr. von Grundherr.
Other popular areas among the BN(O) clientele include suburban spots such as Richmond, Roehampton, and Barnes.
According to experts, while the surge in interest since the new visa scheme was announced has been significant, most people pursuing that immigration route tend not to be the wealthiest Hong Kongers. Higher-net-worth residents had begun to make plans to move their money—and potentially themselves—before the BN(O) visa was even announced.
The availability of the BN(O) visa has increased interest in the U.K. as a destination of choice, Mr. Sarkisian said. However, it isn’t the only route that is growing in demand, and those who don’t qualify for the BN(O) visa are also applying via alternative routes.
Hong Kong investors topped the list of countries with the most successful applications for a highly sought-after investor visa in the fourth quarter of 2020. Ten Hong Kong people received the Tier 1 Investor visa, which requires £1 million in liquid assets, among other things, according to data released by Astons in February.
Paddy Blewer, a spokesman from the immigration firm Henley & Partners, said taking the BN(O) route is “the equivalent of packing up and never going back.” China has called it a violation of international law and an interference in its internal affairs. So while it may be the path of choice for pro-democracy activists, most high-net-worth individuals are not selling their Hong Kong-based businesses and leaving permanently.
Mr. Blewer continued to say that the majority of immigration inquiries from wealthier clients happened in 2019 when they first saw potential risks on the horizon. He said demand in investment migration from Hong Kong jumped 250% between 2018 and 2019, with demand for the tier 1 visa specifically jumping 475% within the same time frame. In 2020, demand has remained high, up 375% compared to 2018.
The reason that high-net-worth individuals started looking for optionality—and, as I said, they haven’t left Hong Kong, they’ve just internationalised—is they could see the political changes coming, the volatility coming, stated Mr. Blewer.
When buying investment property for sale London, high-net-worth Hong Kongers pursuing investment immigration schemes tend to keep the investment property for a significant amount of time, though not full time. After five years on the Tier 1 visa, they can qualify for permanent residency, allowing them to diversify assets geographically. However, many will retain a residence in Hong Kong and still spend some time there.
Political risk is part of it, and unrest is part of it, but it’s not just that they’re supporting protesters, Mr. Blewer said. Rather, they “can make more money while diversifying their links to Hong Kong.”
Gary Hersham of the London-based, super-prime firm Beauchamp Estates said high-net-worth Hong Kong and Chinese clients alike tend to seek property in the city centre when considering any investment property for sale London. Particularly around Buckingham Palace as they want to be in the centre of things.
The most notable transaction was the 62,000-square-foot Rutland Gate megamansion purchased for more than £200 million in January 2020 by the Hong Kong-based property tycoon Cheung Chung-kiu. Beauchamp handled the sale for this significant acquisition.
Marcus O’Brien, a sales negotiator at Beauchamp, said the firm has also sold two other mansions to Hong Kong-based buyers in the past six months. One, in the Belgravia Gate development, is an 11,000-square-foot triplex with a private entrance on Grosvenor Crescent, which sold for £30 million. The other, on Upper Phillimore Gardens, sold for £35 million.
In December 2019, Beauchamp sold a 9,800-square-foot penthouse in Belgravia Gate to a Hong Kong buyer for £65 million.
These guys are sort of setting the trend, where they’re buying best in class because they know they’re going to be using it themselves, Mr. O’Brien said.
He said Hong Kong-based luxury buyers are interested in penthouses, high floors, or, short of that, houses with big gardens. They typically do not want to do any work or renovations, and Mr. O’Brien noted that the majority of clients—even in some of the biggest-ticket sales—are cash buyers.
