Wednesday, February 28, 2024

Clampdown threatens Chinese property investment in London

Greenland Group

Chinese investments in London property has fallen sharply in the last three years

Chinese real estate developer Greenland Group began construction of the tallest residential tower in Western Europe in 2014. But seven years later, there are no towers yet.

We installed a slope for heavy machinery and laid the foundation. But as far as I can remember, there is no activity and no one knows what’s going on, said David McCooke, Head of Home Development at Johns & Co, a real estate company based across the site.

Greenland is one of the Chinese real estate developers who rushed to London after the financial crisis as the housing market boomed and relations between Britain and China warmed up.

But like many London real estate projects, the plan has been hit by a slowdown in sales of luxury residential apartments and the pandemic. Currently, there are concerns that regulatory crackdowns in China may end such developers’ interest in the British capital.

Chinese developers are under pressure from the so-called “three red lines.” This is Beijing’s new rule that seeks to curb excessive leverage across the real estate sector by limiting the amount that businesses can borrow.

According to Real Capital Analytics, between 2013 and 2018, buyers from mainland China and Hong Kong poured nearly £ 3.5 billion into London, almost all the cross-border investment flow in London’s land in 2017.

This has fallen sharply in the last three years to about one-tenth of that level, but thousands of homes in London are still funded by China. Many of these are unfinished and unsold.

Hong Kong-listed developer CC Land, which also owns Guangzhou R & F’s subsidiary R & F Property and the Cheese Greater Tower, paid nearly £ 500 million in 2017 for its site in Nine Elms, southwest London but it is still unfinished.

CC Land said the Beijing crackdown would not affect its development. We don’t have a lot of debt and our project is fully funded.

Even without Beijing’s intervention, many Chinese developers face more difficult challenges than expected in London.

Most of the developers in mainland China I know came to the UK with pretty disastrous consequences, said the boss of London’s leading homebuilder. They have suffered construction costs, and really struggled to sell.

China’s investment in London’s development sites and real estate has declined dramatically as challenges have piled up and prices have levelled off. The immediate question now is not whether the Chinese will continue to come, but whether they will leave altogether.

Greenland claims that it has no plans to sell Spire London and intends to advance development as a high-quality, groundbreaking project in response to ongoing housing demand in London’s Docklands.

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