Housing experts said the recent acquisition of a former industrial site in a relatively affordable part of East London by one of China’s top real estate developers may signal the end of trophy hunting in the London property market.
A consortium formed by Guangdong-based Country Garden, which is China’s top real estate developer by revenue in 2017, and an unnamed Hong Kong fund bought land in Ailsa Wharf from United Kingdom developers Galliard Homes and Lindhill Homes for 80 million pounds (113 million U.S. dollars).
Much of the site in the London borough of Tower Hamlets has been barren and unused for many years.
The Chinese consortium plans to regenerate the site into a 400-million-pound residential development of 785 homes that will be aimed at local buyers.
The site is Country Garden’s first purchase in the UK. Last year, the company overtook major competitors China Evergrande and China Vanke to become China’s largest developer in terms of sales revenue.
UK housing expert and buying agent Henry Pryor noted that the transaction differs from recent foreign investments in high-profile property assets, including the sale of iconic London high-rise towers known as the Cheesegrater and the Walkie Talkie, which both went to Chinese buyers last year.
“I regard this as a watershed moment,” Pryor said. “We have moved from the London market being a casino with property as chips, back to old-fashioned property development where a very grown-up player has spotted an opportunity to make money building homes.”
Country Garden told Chinese media that the new development will include 556 private apartments, 229 subsidized homes and four villas, along with shops and public space.
“The bulk of the consumers for this product are going to be local, that is the market that has got momentum and governmental support at a national and local level,” Pryor said. “The firm will get a lot of kudos and goodwill from the community and pressure groups who will be delighted to see that an overseas investor is building for local consumption.”
Gary Fitzpatrick, director of Lindhill, said his company acquired land in the Ailsa Wharf area throughout the past five years. He said the company made the decision to sell that land when the scale of a potential development grew larger than previously anticipated.
“We were intending to develop at one point, but with a scheme of that size, especially with Brexit and uncertainty, we eventually decided to sell,” Fitzpatrick said. “It’s a very astute acquisition by Country Garden. They’ve done their homework. East London has a lot of growth still and there is a strong demand from the local market.”
James Barton, a partner at British commercial property consultancy Knight Frank, said the transaction points to a shift in focus among foreign buyers, away from trophy assets toward lower-profile commercial property.
“There will be a further concentration in the next few years on these sorts of locations that allow you to develop in mass and scale, and that are relatively affordable,” Barton said.