Asia investors are at risk from slide in London property prices

Construction cranes operate on a building site in London on July 6.
Construction cranes operate on a building site in London on July 6.PHOTO: BLOOMBERG

SINGAPORE (BLOOMBERG) - 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 per cent over the next year, led by declines in oversupplied central London, BlackRock said after the vote.

Investors from Asia accounted for 12 per cent of the £10.7 billion (S$18.67 billion) of direct real estate investment in the UK in the first quarter, making them the largest international group, according to Jones Lang LaSalle. 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 Mr 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 Mr Mackay, who previously was executive director of Asia Capital Markets at CBRE Group for 15 years.

Still, some developers see Brexit as an opportunity. Mr Guo Guangchang, the Chinese billionaire chairman of conglomerate Fosun Group, said his company is increasingly eyeing development opportunities in Europe and particularly in the UK amid the current volatility.

Singapore's second-largest developer City Developments 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 per cent in Hong Kong since June 23, while those of Malaysian company SP Setia Berhad have lost 9.5 per cent.

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 per cent this week amid a tussle for control with shareholders.