Singaporeans are the biggest overseas force in the British capital. The Chinese are a’coming though:
It takes a long trip on the London underground to get to the Aura housing development. From Waterloo Station, 42 minutes tick by until you pull into Edgware, the stop nearest to the half-completed apartment blocks being built on land formerly occupied by a now-bankrupt football club. Attempt the journey at the weekend, when large swathes of the tube are typically shut, and you must make a detour to nearby Canon’s Park station. From there, you face a 15-minute trek taking in a boarded-up pub, a Lidl supermarket and a municipal office block with smashed ground-floor windows. In every sense, you are a long way from what estate agents like to call “prime central London.”
Yet projects like Aura say a lot about how London’s property bubble is changing. Six thousand miles away, on the thirteenth floor of Hong Kong’s Mandarin Oriental hotel, a host of investors cluster around a scale model of this latest addition to northwest London’s housing stock. Some are affluent middle-class Hong Kong couples looking to invest a couple of hundred thousand pounds for the long term. Others are looking for a quick flip. They plan to put down 10 percent of the purchase price now, wait for values to rise, and sell for a tidy profit before the development opens to residents next year.
The smarter Chinese investors think differently from the average Russian oligarch billionaire seeking a London pad. Both like London’s stable politics. But many Chinese buyers are seeking the 5 percent-plus rental yields that can now only be found far from London’s over-inflated centre, where sub-3 percent yields are common.
There’s also plenty of less clever Chinese money, though. Three years ago, mainland China hosted just seven international property exhibitions, according to a person familiar with the situation. Now there are 200 filling huge halls with eager would-be property investors who neither speak English nor know where they are buying. Unscrupulous developers retouch sales images so that Canary Wharf appears to be right next to Tower Bridge, rather than three miles further down the Thames. One unfortunate investor in search of a London address wound up with a property in Lincolnshire.
Why think Hwa Hong?
Hwa Hong Corporation is the latest local developer to set its sights on the vibrant London property market. The listed company recently bought a stake in a residential building in the posh neighbourhood of Kensington. The deal was transacted via a wholly-owned unit which bought a 19% stake in an investment vehicle for $9.9 million. The six-storey freehold property is on Allen Street, which is within 100m from Kensington High Street.
Hwa Hong’s portfolio of properties in London includes freehold residential developments in Queensgate and Hornton Street. At the same time, it also has stakes in office buildings in Central London, Manchester, Liverpool and Sheffield. In the local scene, Hwa Hong has jointly developed the 545-unit freehold condominium RiverGate in Robertson Quay with CapitaLand.
According to Mr Ong Eng Yaw, investment manager of Hwa Hong, he said the firm has always viewed investing in Britain as a means to diversity its property portfolio. He added that Hwa Hong has been able to make sound returns from the investments in the UK and will continue to leverage their knowledge on the market there to explore further opportunities.
FTR, I’m a v.v. contented long-term shareholder in Hwa Hong, once a grab-bag of investments, now a property-owner in S’pore and the UK. The CEO, a Mr Ong Choo Eng, studied at Queen Mary college, London, and has over many yrs dabbled via Hwa Hong in the London property market. His family is the controlling shareholder and the co is like its investment trust, family office. I’m not complaining though. If anything I’d want it to increase its gearing to o.46 (in 2009) from o,22, (albeit an increase since 2010). Interest cover is now a whooping 39.85. Lots of room to expand borrowing.
Every few yrs, co makes a huge special bonus dividend. Its yearly dividend yield of 3% is nothing to sneer at.
Check out the annual report esp the list of its London and other UK properties, and its UK income and non-current assets ( I’m assuming that these are property related). And draw yr own conclusions. I’m juz a gundog, you the reader have to decide whether there’s a bird in the bush, and whether to pull the trigger. BTW, I added a few more Hwa Hong shares to my portfolio recently.