The author of this article argues that the clear result of the UK general election killed the uncertainty that had weighed on the UK property market. Even if some optimism is misplaced, sterling's weakness will lure in foreign property investors.

The following commentary is from Brian West, a private client manager at Conrad Family Office, whose office is based in London. The organisation, which talks about how it has a “vast history” in privately funded property lending, for example, also operates in areas such as corporate and fiduciary services, trust and estate planning, international tax advice, and wealth transition, among other services. 

The comments here were written shortly after the UK Conservative Party stormed to victory in the 12 December 2019 general election, a poll in which Brexit played a central role. For many people, judging by recent commentary, a major consequence of the result is how it has lifted shackles from the British property market. Among the factors in play are returning Asian investors into the UK market, a fact given added impetus by political unrest in Hong Kong.

The editors are pleased to share views with readers and invite responses. The standard editorial disclaimers apply when it comes to views of outside contributors. Email tom.burroughes@wealthbriefing.com and jackie.bennion@clearviewpublishing.com

Perhaps for the first time since Tony Blair came to power [1997] it can be said with justification that we have an optimistic Prime Minister. For an optimist the road can often be bumpy but crucially it is always leading somewhere. Whatever his faults, Boris Johnson is, by nature, an optimist and with this optimism and positivity comes a feelgood factor that encourages spending and investment to boost the economy.
 
Little surprise then that within days of the Conservatives impressive election victory, Hong Kong-based K&K Property Holdings paid £130 million ($169.4 million) for Orion House, an office building in Covent Garden in central London. K&K’s CEO, Kino Law Kin-yat said “the office building will provide attractive rental income” and then confirmed that his company will “actively explore opportunities for different types of commercial projects. For Law, a former UBS investment banker, it seems that Orion House is just a first foray into the UK market. 

Moving even faster than Law and his team, a fellow Hongkonger, a businessman in his thirties, snapped up a £65 million Belgravia mansion within hours of the polls closing. The Belgravia Gate deal, thought to be the highest price paid for a Penthouse in London throughout the whole of 2019, was brokered by high-end agents, Beauchamp Estates. 

Having been the biggest overseas buyers of UK property between 2015 and 2018, Hong Kongers enthusiasm, after a brief lull early in 2019, surged back strongly in the final months of the year. Against a backdrop of turmoil and uncertainty back home eclipsing anything in the UK, the momentum from the territory, which was building before the election, has been positively turbo-charged since! 

Of course, it’s not just Hong Kongers who welcomed the clarity a clear Tory victory. Overseas buyers from across the globe are now seeing a window of opportunity to lock into the relative weakness of sterling before Conservative manifesto proposals for a further 3 per cent stamp duty surcharge on non-UK residents are introduced. 

Whilst Brits have obsessed about Brexit for the last few years, it is probably fair to say that for most overseas investors the allure of London and the UK never really faded, as evidenced by the exchange rate induced surge of investment after the referendum result in 2016. 

Whilst ardent Remainers seemed to lose a sense of objectivity about the UK’s place in the world, well-informed people in Dubai, Moscow, Hong Kong and New York, to name but a few, never did. They continued to see the UK as the fifth largest economy in the world, a global trading powerhouse with an infrastructure, regulation and legal system that are the envy of the world. Geographically well placed, resilient, business friendly and dynamic – why wouldn’t they want to invest here? 

Now, with sterling expected to strengthen progressively as political and economic uncertainty clears and trade deals are agreed with the EU and other nations across the globe, overseas investors have even more incentive to move quickly. The window in which overseas buyers can achieve maximum benefit is limited before the potential stamp duty surcharge is introduced. It is worth remembering that the additional stamp duty on Belgravia Gate would have equated to nearly another £2 million. 

This almost certainly explains breaking news that the Chinese owner of the “Cheesegrater” skyscraper in the City, Cheung Chung-kiu, has now agreed to buy a 45-room mansion overlooking Hyde Park for between £205 million and £210 million. When the sale completes in the next few weeks it will officially become the UK’s most expensive home, although Cheung may renovate and convert the property into apartments with a potential value of up to £700 million.  

Of course, it is conceivable that as 2020 progresses negative sentiment over the prospects of the UK’s future trading relationship with the EU might start to kick in once again. This, along with sellers jacking up their prices, may begin to temper the boom that has already begun in overseas investment. 

Notwithstanding that the timescale for achieving a deal is tight, it must never be forgotten, however, that the EU is a massive net exporter to the UK. The bloc has every incentive to agree a deal before the end of the year. Whilst the French buy Citroens and Peugeots, the Brits buy BMWs and Mercedes.
 
Furthermore, Boris no longer leads a weak minority government that can easily be bullied by EU negotiators. Whilst negotiations will no doubt still go down to the wire, it seems likely that a deal can be achieved. 

Of course, in the unlikely event that this optimism is misplaced, a hard Brexit would almost certainly see sterling falling back again and result in lower prices for overseas investors as their own currencies appreciated against the pound! Whichever way you cut it then, it seems that the prospect for overseas investment in prime London and the wider UK properties, both residential and commercial, is pretty good. 

This level of optimism may be frowned upon by the pessimists, but it cannot be denied that the dam has been burst by a Boris victory. At this point, the words of CS Lewis seem quite pertinent; “There are far, far better things ahead than we leave behind.” Who knows, in time the Scottish Nationalists might even become a little more optimistic about Team UK.