Asia’s Investors Are at Risk From Slide in London Property Prices

Asia's Large Stake in London Real Estate
  • HKMA, Wanda among region’s buyers with projects in the city
  • Fosun, City Developments say it may be a good time to buy

From Hong Kong’s central bank to China’s largest property developer, Asian investors have a lot riding on London’s real estate market.

Britain’s decision to leave the European Union has clouded the outlook for property, prompting asset managers to freeze withdrawals from real estate funds as investors rushed to redeem their money. Commercial property values could fall about 10 percent over the next year, led by declines in oversupplied central London, BlackRock Inc. said after the vote.

Investors from Asia accounted for 12 percent of the 10.7 billion pound ($13.9 billion) of direct real estate investment in the U.K. in the first quarter, making them the largest international group, according to Jones Lang LaSalle Inc. The country has been among the top five global real estate investment destinations for decades, especially for buyers from Singapore, China and Hong Kong.

“It’s a confidence crisis,” said Reid Mackay, Singapore-based managing director of EastGate Asia Pte, a real estate brokerage and advisory firm. “It will very much affect transactions that are pending.” Deals that are pending “are virtually put on hold. The transactions volume will probably fall,” said Mackay, who previously was executive director of Asia Capital Markets at CBRE Group Inc. for 15 years.

Finding Opportunities

Still, some developers see Brexit as an opportunity. Guo Guangchang, the Chinese billionaire chairman of conglomerate Fosun Group, said his company is increasingly eyeing development opportunities in Europe and particularly in the U.K. amid the current volatility. Singapore’s second-largest developer City Developments Ltd. is also looking for bargains in the London property market and is ready to pounce in a fire sale, Chairman Kwek Leng Beng said.

Shares of Dalian Wanda Commercial Properties Company Ltd., which is building homes in London’s Nine Elms district, have fallen 7.2 percent in Hong Kong since June 23, while those of Malaysian company SP Setia Berhad have lost 9.5 percent. China’s largest developer China Vanke Co., whose shares started trading in Shenzhen on July 4 after being halted for more than six months, plunged almost 20 percent this week amid a tussle for control with shareholders. Here’s a list of select projects in London under development and some of the Asian backers whose money is riding on them.

Hong
Kong Monetary Authority
Hong Kong Bought a 50% stake in a project
in London’s luxury-shopping district 
Hanover Square Estate site 
Oxley Holdings Ltd.SingaporeBought former Royal Wharf site in east London where it plans to build 3,400 homes 
Eco World Investment Co.MalaysiaJointly developing three London residential projects with U.K.’s Ballymore Group near Battersea Power Station
Knight DragonHong KongBought the remaining 40% in a mixed-use project in London’s Greenwich Peninsula
Dalian WandaChinaBuilding 436 homes in Nine Elms and a hotel 
SP Setia, Sime Darby, Employees Provident FundMalaysiaFormer Battersea Power Station; plans to build more than 4,000 apartments
Greenland GroupChinaFormer Ram Brewery site and building tallest residential tower at Hertsmere House at Canary Wharf
China VankeChinaOwns a 20% stake at the The Stage project in Shoreditch 
Mitsui Fudosan Co.JapanOwns 25% in U.K. developer Stanhope Plc., which is developing 3 mixed-use projects including Whity City Place, the BBC Television Centre and One Angel Court
Advanced
Business Park and Citic Construction
ChinaDeveloping former London Royal Albert Dock site
AustralianSuperAustralia67.5% stake in 67-acre Kings Cross Central development project
Citic Capital, Cindat CapitalChinaJV with U.K.’s Brockton Capital for 60 Curzon Street
City Developments Ltd.SingaporeResidential project on former Stag Brewery site
Hotel Properties Ltd.SingaporeMixed-use project on former Royal Mail delivery office
Temasek, Hotel Properties, Amcorp PropertiesSingapore, MalaysiaBankside Quarter on the former Sampson House, Ludgate House site will be developed by U.K.’s Native Land with the Asian investors.

Source: Cushman & Wakefield, Bloomberg

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