In London’s Royal Albert Dock, almost two dozen buildings conceived of as a new Chinese Canary Wharf stand mostly empty and in the hands of lenders who have finally pulled the plug.
It is a sign of how ripples from China’s troubled property markets are making waves overseas. The crisis at home, coupled with a freeze in U.K-Sino relations, the introduction of capital controls and the after effects of Brexit, have seen the torrent of capital that once flowed to London from China all but dry up.
“China’s debt-saddled private developers face growing risks of a liquidity crunch, with home buyers and bondholders’ shattered confidence raising the specter of broader financial contagion,”
U.K. real estate deals by mainland Chinese investors have plunged by almost 88% in the past five years, according to data compiled by Real Capital Analytics Inc. The drop in deals for development sites was even more pronounced, falling to just 11.3 million euros ($12.8 million) last year from a 2017 peak of 731 million euros, the data show.
Chinese investors poured into the U.K. in the first half of the last decade as the Conservative government led by then Prime Minister David Cameron and then London Mayor Boris Johnson courted investment. The ABP project in London’s Royal Albert Dock, which saw City Hall sign over 35 acres of derelict land to little-known developer Xu Weiping was supposed to be the jewel in the crown.
The deal represented not just a vast investment in bricks and mortar but was also meant to provide a home for dozens of up-and-coming Chinese businesses, create thousands of jobs and strengthen Anglo-Chinese ties. Almost seven years later, what’s left is a vast swathe of empty buildings and a city that’s grown so impatient over the lack of progress that it is threatening to reclaim the land if the lenders can’t show they plan to continue. While the Chinese property crisis has principally impacted developers, signs of the pressure it is putting on investors are also showing up in London’s trophy investment property market.
