After the Chinese government restricted outward investments from the country earlier this year, a new amendment to the rules could provide a much-needed loophole making it easier for Chinese buyers to invest in the UK.
While outbound investment from China was largely encouraged between 2012 and 2016, the government more recently began to curb it with more stringent regulations designed to minimise risks, with major restrictions on private firms taking their money out of the country without prior approval from Beijing.
However, a new ruling from the National Development and Reform Commission of the People’s Republic of China (NDRC) has now created a route for Chinese investors to essentially reinvest cash into the UK as long as it is recycled from an existing property venture, or raised by non-Chinese banks.
Furthermore, state approval will no longer be required for any overseas investment from China relating to infrastructure and development, even if the funds are currently in China and not yet deployed overseas – reopening access for Chinese investors to enter the UK property market.
Opening the floodgates for investors
Those who already invest in UK real estate will now have the added option of trading and refinancing their existing stock while reinvesting elsewhere, without first requiring the go-ahead of the Chinese government, while also encouraging greater diversification into the asset classes covered by the new exemption, including logistics, infrastructure and business parks.
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With the latest research from Cushman & Wakefield revealing that Chinese investment into London property has fallen to a new two-and-a-half-year low with just £482m worth of commercial property transactions completed in the first quarter of 2018, the news could bring a much needed boost to the market. Compared to 2017’s top performance which saw £7bn ploughed into the the UK capital from China and Hong Kong, the recent restrictions placed on outbound investment have certainly played a role in slowing things down.
Speaking before the most recent NDRC amendment, Richard Divall, head of cross-border capital markets at Colliers International, said: “It’s more difficult for Chinese [investors] and some Hong Kong people to get their money out at the moment. They’re not bidding as much as they were before. If anything we’re going to see some of them selling.”
As private investors are now expected to begin to take advantage of the easing off of the restrictions, we could be set to see a significant uplift in UK property market investment from China.