The 11K’s Expert Series: UK Investment Opportunities for Chinese Investors – by Yongyi NeathercoatPosted by in China, Inspiration, Latest News, Latest News, Trends
At present, the UK’s property market is a buyers’ market. According to Bloomberg news, the uncertainty over Brexit and the rising interest rate are the main reasons for the sluggish state of the property market at the moment. For Chinese people, property investment is the most common way to keep the value of their deposable money. At a time when the property market is unstable, are there any other investment formats which are worth considering? What does the investment environment in the UK look like?
In our first 11K’s Expert Series, we invited Yongyi Neathercoat, founder of Neathercoat Financial Planning, to offer her advice on strategic investment opportunities in the UK.
1. The UK property market, especially the London property market is a bit sluggish now. But many foreign buyers see it as an opportunity to invest due to the relatively low price. And some people would like to wait for the price to fall further. What do you think of this situation?
The Guardian recently reported that UK House Prices Grew At the Slowest Rate For Five Years. We have also seen property sales slide and estate agents are telling potential sellers to set a realistic price when putting their property on the market. To decide whether it is a good time to invest in London property, we need to look at what elements affect the market in the near future.
The London property market is unique. It has its own micro climate. Generally speaking, there are risks involved in any investments. Firstly, the market risk: we have seen London property prices increase over the past years which lead to the current over valued property market. Secondly, political risk. Some foreign investors are not keen to invest in London or not able to, due to restrictions from their own country. Thirdly, Brexit uncertainty. How much will Brexit affect the market and for how long? Nobody knows.
- Buying property is a very common investment tool for Chinese. Apart from property, is there any other type of investment that you would recommend to both Chinese in the UK and Chinese in mainland China?
The UK government gives generous exemptions and allowance to the UK tax payers. For example, tax relief when investing in pensions, tax free ISA investments, and those tax reducing investment products, such as VCT, EIS and SEIS. Chinese investors in the UK can and should take advantage of these options.
Chinese in the mainland can invest in property funds that are managed by professional fund managers. A fund can invest in commercial properties, such as offices, shopping malls etc in different locations, or invest in property company shares. This way, an individual investor can benefit from a diversified range of properties, rather than buying one or two. It also reduces a lot of management costs and administrative work. The other benefit is liquidity. Funds are cheaper and easier to sell than properties.
All investors can choose to invest in a mixed managed portfolio. If you like one particular industry, you can buy a technology fund or a property fund. If you want to invest in a particular region, you can buy a North America fund or India Fund. It is very flexible.
Many funds are actively managed. The managers buy and sell investment holdings based on the research done by their team.
- What are the advantages of the investment category that you recommended compared with investing in property?
The most important investment strategy is diversification, i.e. not to put all your eggs in one basket. Collectives (funds) are a good way to invest. Professional fund managers make investment decisions based on the research done by their team of researchers. They use different method to invest in different asset classes, different geographic regions, different industries and different companies.
The other advantage is tax efficiency. Investor should always take taxation into consideration before investing. In the UK, the 3% Stamp Duty increase has added cost for overseas buyers, £30,000 additional cost on a £1 million property. Capital Gains Tax, which is 18% and 28% on the gains made on residential properties, compares to 10% and 20% on the gains made on other investments for UK residents. Mainland Chinese only liable to Capital Gains Tax on residential properties. This makes investing in collectives much more attractive to them. Those investors who want to pass their property to the next generation should also consider the 40% Inheritance Tax, which is £400,000 on £1 million.
- Your ultimate advice for Chinese people investing in the UK.
A professionally managed, diversified portfolio that is based on the investors’ personal aspiration, needs and risk profile. If you like property, by all means invest in property, such as a property fund; if you like technology, you can choose technology funds. London is one of the world’s top financial centre, there are many opportunities in London.
About Yongyi Neathercoat:
Yongyi is a qualified Financial Planner and a pension specialist. She is a member of the UK’s Personal Finance Society (PFS) and European Financial Planning Association (EFPA). Based in London, Neathercoat Financial Planning offers a comprehensive range of wealth management services to individuals, families and businesses. Contact her at Yongyi.Neathercoat@sjpp.co.uk or visit her website: www.neathercoat.com.
Notes to readers:
The interview was done by Fei Meng, Account Manager at 11K Consulting. Contact her at email@example.com if you would like to be featured in The 11K’s Expert Series, a series of expert opinions on UK-China/Asia opportunities and challenges. We would love to hear from you.