Weak sterling will continue to draw ongoing interest from Asia Pacific investors to Britain if the currency continues to slide at a similar rate since the Brexit referendum.
With British Prime Minister Theresa May having triggered Article 50 to start the process of withdrawing from the E.U., the depreciation of the pound has spurred increased investment in the United Kingdom (U.K.) from the Asia Pacific, according to real estate firm JLL.
The depreciation, coupled with a slight drop in capital values, has led U.K. commercial real estate to be discounted by 16 percent on average to overseas capital relative to pricing since the June 2016 vote, says the real estate and investment management firm.
Hong Kong and China Demand
Although currency movements have not had a strong historic correlation with overall international capital inflow into Britain, they are part of the reason why the market has experienced a recent surge in demand from buyers from the Asia Pacific region, headlined by Hong Kong and mainland China.
Based on JLL forecasts and projections on currency by Oxford Economics, Chinese cross-border purchasers may enjoy total returns of five to 10 percent in London office properties this year, after adjusting for expected currency movements.
Singapore and Hong Kong investors will likely enjoy a similar rate of returns.
Almost One Third From Asia
Asia Pacific and European (ex. U.K.) based investors recorded a surge of investment, with the Asia Pacific share rising from 17 percent to 28 percent, and Europe from 14 percent to 23 percent.
«Many investors from China and the wider Asia Pacific region are attracted to the depth, liquidity and familiarity of the U.K. market and come seeking diversification and safe haven forms of investment,» said Alistair Meadows, Head of UK Capital Markets at JLL.
