Asian investors return as UK property market rebounds

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A new normal is emerging in the UK property market, with its resurgence as a popular destination for capital investment from Asia following the effects of the covid pandemic and Brexit.

Iain Hindhaugh

Property adviser Knight Frank’s annual London report, published in February, said £4 billion ($4.6 billion) was to be invested in the London office market in 2022. Much of that is expected from the Asia-Pacific region, with investors from Singapore, Hong Kong, Malaysia, mainland China and South Korea, among others. The £4 billion is nearly double the volume of capital in the region last year.

“This investment has slowed during the pandemic, although the reason for this may be more practical than due to negative market perception – travel restrictions – which meant inspecting buildings was more difficult, some investors being reluctant to put significant capital into a property asset they hadn’t seen,” said Iain Hindhaugh, property partner at Addleshaw Goddard in London. Review of business law in Asia.

“Now that travel restrictions are easing, we are seeing an increase in transactional activity from international investors.”

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Linda Jacques

Linda Jacques, a partner at Lester Aldridge Solicitors in Southampton, agreed that much of the Asian investment in UK property is largely driven by market momentum, particularly for properties in London.

“The real estate market was very hot before the pandemic. It went down and now it started again,” Jacques said. “Overall, the UK is very open to investment from around the world as it doesn’t put up too many barriers, it’s always very easy to open a new business as the government offers incentives for businesses to come to the UK and the tax is quite high. fine here.”

While the broader global political and economic outlook continues to raise concerns, Hindhaugh said demand persisted from opportunistic investors who could see a slight shift in recent months towards a buyers’ market, with opportunities for value creation.

One example is Lembaga Tabung Haji’s (TH) acquisition of 33 Horseferry Road in London, a building occupied by the Department for Transport, for £247.5m, which closed during the traditionally longer summer months. calm. TH is an Islamic institution providing facilities such as banking services to Malaysian Hajj pilgrims and also manages investments.

“Market fundamentals remain strong, occupier demand has returned despite the recent work-from-home trend as employers seek higher quality buildings to support the race for talent and shifting priorities in this talent pool,” Hindhaugh said.

However, Hindhaugh warned that one of the key legislative changes of which international investors should be aware is the Economic Crimes (Transparency and Enforcement) Act 2022, which came into force for all intents and purposes in August.

It requires most overseas entities acquiring property in the UK to register with Companies House and provide full details of its beneficial ownership. This also applies to owners of existing assets, who will need to register by January 31, 2023.

The law is designed to increase ownership transparency in the UK property market, which has become increasingly politicised. Following the conflict in Ukraine, questions have arisen as to who actually owns property in the UK and to what extent property could have been acquired using illicit money.

“Previously, many offshore companies could acquire property in the UK and the ultimate owners of these offshore companies could largely be hidden behind various trust structures and the use of companies from high secrecy jurisdictions – the British Virgin Islands (BVI), Cayman, etc. said Hindhaugh. “The BVIs, in particular, have always been a popular choice of jurisdiction for [property] the acquisition of businesses in the Asia-Pacific region.

With most investment channeled into London and the south east of England, Jacques de Lester Aldridge said the government had tried to encourage investors to look beyond those areas.

Jacques said the government’s leveling up policy was aimed at dispersing financial wealth to areas of the country that might have fallen behind slightly. Scotland, Wales, Northern Ireland and the North East of England are the four regions where the government is really keen to see investment flows.

“Whether that’s now a buzzword or not, there’s definitely a focus on trying to get more investment into these areas following a big push for Leveling Up,” Jacques said. “The UK is very keen to attract all investment in technology, in particular, but I think in all areas anything is possible.”

In terms of policy developments, Jacques has seen the government gain more power to oversee investments, mergers and takeovers of certain companies through its 2021 National Security and Investment Act, which came into force. effective January 4.

This law allows the government to screen companies that attempt to take control of another business or an asset in 17 sensitive sectors of the UK economy.

“Since 2021 there has been more focus on certain key sensitive areas of business, but I think the UK is just catching up with the rest of the world in similar legislation,” Jacques said.

The British property market collapsed due to the risk of a “no deal Brexit” until January 31, 2020, when Britain finally withdrew from the European Union. At the same time, the covid pandemic was beginning its global spread from Wuhan, China, which had weighed on the economy for at least two years, which had seen communities locked down and travel restrictions imposed.

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