'Fry': the Motives and Methods of Middle-Class International Property

Article

Urban Studies 2018, Vol. 55(9) 2040–2056 Looking for big ‘fry’: The motives and Ó Urban Studies Journal Limited 2017 Reprints and permissions: methods of middle-class international sagepub.co.uk/journalsPermissions.nav DOI: 10.1177/0042098017702826 property investors journals.sagepub.com/home/usj

Hang Kei Ho Uppsala University, Sweden

Rowland Atkinson University of Sheffield, UK

Abstract Anxieties about the effects of international property investment in world cities like London have mainly focused on super-rich investors and corporate vehicles that have generated price inflation of assets and accelerated exclusion from an already expensive market. In fact, many international investors in the city’s housing market are middle-class individuals, and focusing on Hong Kong as an emblematic example of such processes, we examine their motives and the products offered to them by important investment intermediaries. We find that an important rationale for these investments lies in local class-based uncertainties and existential anxieties concerning the future of Hong Kong itself. We focus on the cultural roots of these investor rationalities but also consider the role of investment intermediaries who have helped bolster confidence while shielding investors from the consequences of their aggregated market power – concerns in London over household displacement from foreign investment. We suggest that what may seem to be the pre- datory search to ‘fry’ property (䀺㦻), a Hongkonger colloquialism referring to the search for high performing investments, should also be understood as actions anchored in and generated by the habitus of the Hong Kong middle class whose lives have been moulded by historical geopolitical uncertainty and worries about its longer-term social positioning and security.

Keywords anxiety, Hong Kong, housing market, housing tenure, London, property wealth

Received July 2016; accepted February 2017

Introduction The uncertainties of investments in the built environment following the global financial Corresponding author: Hang Kei Ho, Department of Social and Economic crisis and the constitution of trading blocs Geography, Uppsala University, Box 513, Uppsala 751 20, and international economic systems have Sweden. generated profound benefits for those cities Email: [email protected] Ho and Atkinson 2041 perceived to be sites of stability and security. points identified by main brokers in the For those key cities offering stable environ- London market (Knight Frank, 2014; Savills ments with good prospects for capital invest- World Research, 2016), Hongkongers ment, the result has been the attraction of accounted for around one in six transactions substantial transnational investments to of new developments in central London in London and other cities in which wealthy 2012 (Knight Frank, 2013). In this article, individuals have purchased residential prop- we seek to better understand the architecture erties at prime locations (Atkinson et al., of systems that enable these flows in tandem forthcoming; Atkinson et al., 2016; Paris, with a sociological analysis of the anxieties 2013). In many cases, asset gains have moti- and dispositions of those involved, which vated these rather than habitation, using are also important in shaping investment residential real estate as a ‘safe deposit box’ decisions. (Fernandez et al., 2016) to physically park Since being handed from Britain to main- wealth and realise its growth (Pow, 2017) or land China in 1997, Hong Kong has to achieve long-term security by purchasing remained a wealthy and low-tax city-state. property to rent out over long periods of Its robust legal and financial systems time. Despite the variability of motives and allowed the postcolonial city to thrive, impacts, foreign investment is often singled becoming one of the most important laissez- out as an underpinning factor in the devel- faire global city economies. Since the cre- opment of an increasingly exclusive and ation of the Index of Economic Freedom by excluding housing market. These issues lie The Heritage Foundation and The Wall behind the concerns of this article. Street Journal in 1995, Hong Kong has The purchase of prime properties by indi- ranked consistently as allowing the highest viduals from China, Russia and the Middle freedom of economic activity in the world East has been fuelled in part by the desire to (Miller and Kim, 2016), permitting, for safeguard wealth in an uncertain local politi- example, the local currency (Hong Kong cal landscape. The resulting internationalisa- dollars) to be converted and freely trans- tion of real estate transactions ferried in by ferred out of the city. Despite Hong Kong’s these political and economic drivers has relatively small population of 7.4 million helped to transform the understanding of (end-2016) with a landmass of only 1106 ‘local’ real estate circulations as strongly km2, its economic power continues to make influenced by much wider ‘geopolitical circu- an impact globally upon the UK and other lations’ (Bu¨denbender and Golubchikov, property markets. Behind these outward 2017: 89). Within the East Asian context, flows of money either in search of a home or itself (mainland China, Hong Kong, Japan, purely for investment, we observe deep fears South Korea and Thailand) the result of focused on political uncertainty around intensified globalisation, has been the inten- mainland China’s relationship with post- sification of a neoliberal ‘development logic’ handover Hong Kong. These fears drive the captured by elites able to gain control of wealthier segments of the city’s population housing policy and profit from real estate to buy overseas properties, often with relo- (Doling and Ronald, 2014). Similarly, cation options should local economic, civic Rogers (2016a) has argued that with the eco- and legal conditions deteriorate. nomic rise of Asian countries such as China, The fears of the Hong Kong middle their international real estate and landow- classes echo existing sociological characteri- nership helped challenge the geopolitical pri- sations of the modern world as a space of macy of the West. Among the originating uncertainty, and the possibility of economic 2042 Urban Studies 55(9) insecurity generated via personal cata- This threat is echoed by businesses, with three- strophes or potential systemic shocks in a quarters of those polled warning London’s context where the ostensible assurances of housing supply and costs are ‘a significant risk nation states have evaporated or been sub- to the capital’s economic growth’. (Turner & stantially challenged by increasing adherence Townsend and London First, 2014: 5) to market orientations and fiscal austerity (Bauman, 2000, 2006; Streeck, 2016). The conditions underlying this crisis can be Meanwhile in London, a city characterised traced back at least as far as the introduc- by a lack of new housing supply alongside tion of the Right to Buy scheme in the 1980s massive investment in top-end residences by that allowed council tenants to purchase international investors, we see the conditions their homes from the state at a discount investors hunger for – dramatic rises in (Forrest et al., 1999). This created a shortage house value and uninterrupted occupancy by in public housing with a knock-on effect in tenants. Outside these circuits of investment, the availability of rental market properties there is a pervasive sense of social crisis in relative to a diminishing supply through which homelessness, long public housing construction by local authorities. A combi- waiting lists, the development of informal nation of the presence of very highly paid housing and household displacement indi- City workers and long economic boom from cate the presence of deep social stresses and the mid-1990s until the start of the crisis in inequalities in the city (Atkinson et al., forth- 2008 saw further rounds of housing asset coming; Watt, 2016). rises. More recently, we have seen the Average house prices in London doubled approval of private residential developments to £600,625 between 2009 and 2016 (LSL by various boroughs in London with little or Property Services, 2016), while average sal- no affordable component in recent years, aries have stagnated. Coupled with the rising and foreigners bought around 75 percent of cost of living, low- and middle-income work- new homes in the inner London boroughs in ers have moved further away from the city 2012, with buyers from Hong Kong, centre in search of affordable housing. This Singapore, mainland China and Malaysia is beginning to affect the London workforce, accounting for more than half of those noted by bodies representing business inter- (Knight Frank, 2013). Furthermore, nearly ests in the city who have come to see hous- half of properties worth more than £1 mil- ing affordability as an increasing potential lion were bought by non-UK citizens in the levy on them through pressures on wage same period. London is thus positioned as costs demanded by struggling workers. A offering good prospects for personal wealth 2014 report on housing compiled by a major creation. As we discuss later, London enjoys business membership group, construction a feted status among the Hong Kong middle consultancy London First and Turner & class as a city capable of relieving some Townsend, highlighted concerns about the deep-seated anxieties surrounding their prospect of a reverse brain drain of skilled social, economic and familial futures. workers leaving the city for more affordable Our research draws on data obtained locations that presaged the anxieties of a from interviews with private investors, estate future Brexit: agents and town planners, as well as a sys- tematic analysis of advertisements published Many London employees would currently con- in Hong Kong newspapers and online mar- sider leaving the city to work elsewhere due to keting materials. The structure of the article difficulties with paying their rent or mortgage. is as follows. In the first section, we consider Ho and Atkinson 2043 the existing evidence on international hous- have either been unaffected or have seen ing investment in London and discuss the their personal fortunes and property portfo- economic history of Hong Kong to explain lios grow significantly (Oxfam, 2016). how citizens have accumulated wealth to The continued growth of capital can be invest in global properties. The article then linked to Piketty’s analysis suggesting that details our research approach to interviews in phases when the return to capital is and materials published in both Chinese and greater than incomes, wealth condenses to English. Here we also suggest the critical those at the top and to rentiers able to take importance of grounded and linguistic insi- advantage of their position. Analysis by der knowledge to understand Hongkongers’ Piketty (2014) suggests that the phase of eco- social status, anxieties and investment strate- nomic growth, redistribution and collective gies. The article concludes by highlighting resources in the 20th-century post-war the main reasons for the flow of capital from period was an aberration relative to the Hong Kong to the UK’s property market course of growth in capitalist fortunes before and the intermediaries involved in the pro- and after. In this sense, the neoliberal phase cess. We close with an analysis of the rela- of expanding market orientations and tionship between the distinctive confluence dynamics from the 1980s signalled an of global, national, city and social factors aggressive attempt by the wealthy and sym- generating spurs to international investment pathetic governments to bolster the capture by a periodically worried and status- of growth by the already wealthy. In geogra- conscious class fraction. phical terms, these processes generated significant enclaves and investments in fixed Transnational elite and middle- capital resources, notably homes (though latterly, also commercial property) and the class investment in London creation of what have recently been identi- In recent years, wealthy and transnational fied as essentially plutocratic cities where wealthy elites (often captured conventionally urban governance identifies its future as as high net worth individuals (HNWI) and being aligned with the needs of the wealthy ultra-high net worth individuals (UHNWIs)) and the need to promote capital investment have gained attention in various popular (Atkinson et al., forthcoming). spheres because of their financial, political Evidence of the good fortunes of the influence and consumption power (Atkinson already wealthy can be seen in the annual et al., forthcoming). Academic analysis on wealth reports. For example, these suggest this topic gained momentum since the call the number of HNWIs increased from 8.6 by Beaverstock et al. (2004) to carry out million in 2008 to 14.6 million by 2015 more research on the geographies of the (Capgemini and RBC Wealth Management, super-rich. Meanwhile, the global credit 2015). Various rich lists compiled by media crunch from 2007 and the global financial outlets including the Sunday Times (2016) crisis have led to job losses, house price stag- and Forbes (2016) have popularised interest nation and the depreciation of pension funds in the global housing market and stellar for ordinary citizens, including those in the house prices in urban centres – notably PIIGS (Portugal, Ireland, Italy, Greece and London, New York and Hong Kong. This Spain), the US and the UK. In comparison, interest has also focused on the sale of prime the super-rich (Hay and Muller, 2012), the (properties worth between £2 million and £5 so-called butler class who work for them million) and super-prime properties (proper- and wealth managers (Harrington, 2016) ties worth over £5 million) that have been 2044 Urban Studies 55(9) left vacant with the intention of parking heads of households were peasants, mer- assets, almost exclusively with the aim of chants, artisans, and occasionally scholars; achieving capital growth. Here the phenom- they were not organized as distinct classes of enon of ‘lights-out London’ in prime resi- people; but rather they were family heads who dential areas such as Knightsbridge has been moved into and out of ambiguously defined social and economic roles. (Hamilton, 2006: seized on as evidence of the under-use of 135) property at a time of intense housing stress for the majority in the city. As we will demonstrate, the Chinese con- While academic discussion and the media tinue to prefer to deal with other Chinese, continue to focus on how the super-rich use with deal-making being conducted through top-end property as a safe haven to deposit an emergent UK- and Hong Kong-based money (Fernandez et al., 2016), the opera- real estate business that often employs tion of that niche is somewhat different for Cantonese- and Mandarin-speaking staff to properties worth less than £2 million. For assist investors from both Hong Kong and example, the transactions of many proper- mainland China with purchasing properties ties at the top of the market are often carried in the UK. Australian and Canadian real out through companies registered in tax estate firms have adopted a similar practice havens, including the British Virgin Islands. of hiring staff experienced with Chinese cli- However, the current debate has largely ents. Other commentators such as King overlooked the ways South East Asian buy- (2002: 131) argue that three historical forces, ers from Malaysia, Singapore and Hong namely capitalism (as a key economic force), Kong have invested in the core market. colonialism (the application of political Examining the middle reaches of the force) and modernity (a cultural force), have London market, we see Hong Kong invest- shaped Hong Kong. Focusing on colonial- ment operating through monies invested in ism, Faure and Lee (2004) point out that property, then rented as apartments in the city Hong Kong’s success began when Western centre. The popular belief is that a class of countries invaded China in the 19th century, super-rich Chinese investors forms one of the and the city subsequently became part of major groups from South East Asia investing Britain. The British established their own heavily in London’s housing market, but enclaves with Western legal systems, using middle-class Hongkongers are also keen specific policies regarding business regula- investors, with evidence showing that the first tion and company legislation (Faure and wave of these investments began in the early Lee, 2004: 2). 1990s. Given a longer historical perspective, Company legislation formed much of the Hongkongers often act in entrepreneurial nascent business foundation Hong Kong’s ways. Capitalist expansion started in the city- economy and allowed relative transparency state in the 19th century, when East Asian and efficiency in business operations. countries, mainly Japan and China, opened Aspects of these legal foundations later to the Western-dominated world economy enabled transnational property investment. (Hamilton, 2006: 130). While the Japanese As the international economy grew in the focused on what has been described as a ‘cor- 1970s, many multinational corporations set poratized political economy’, the Chinese up regional offices in East Asia, and Hong emphasised deal-making that often involved: Kong became the first choice because of its well-developed legal framework and robust the heads of households who wanted to economic system. Other factors added to achieve some wealth and local renown. These this privileged position, including the local, Ho and Atkinson 2045 educated work force, low-tax regime, rela- Hongkongers became familiar with the tive political stability and existing links with mechanics of purchasing apartments in other Britain. Furthermore, the Hong Kong dol- parts of the world. Kan (2017) highlights lar, established in the middle of the 19th earlier trends of property investment from century, has been stable, pegged with the US Hong Kong to mainland China since the late dollar since 1972 (in 1983 the exchange rate 1970s and argues that the economic interac- was set around US$1 to HK$7.8). These tions between the two regions can be under- economic conditions allowed various indus- stood through the geopolitics of sovereignty tries and businesses to grow from the 1960s, and cultural identity. Similarly, research by creating many wealthy industrialists and Rogers et al. (2015) has explored the ways in individuals. More importantly, mainland which Hong Kong and Chinese investors China was closed to foreign investment buy properties in Sydney and Melbourne, between 1949 and 1978, thus channelling which have been linked to affordability economic activity through the territory, as issues for residents. Nevertheless, real estate Faure and Lee (2004: 5) observe: ‘Hong relations remain constituted through govern- Kong served as China’s window on the ments, real estate agents, financial profes- world, its consumption and export being sionals and middle-class, as well as HNWI, responsible for a full third of all China’s for- investors (Rogers et al., 2015: 744–745). eign exchange earnings’. We can view concerted attempts at per- In comparison to Britain (Abercrombie sonal wealth creation as a reflection of the and Urry, 1983; Butler and Savage, 1995; extent and structure of underlying political Savage, 2010) and Canada’s (Ley, 1996) and financial influences that concern Hong well-defined class system based on occupa- Kong citizens to find a means of insulating tion, cultural assets, consumption practices themselves against future risks. Here, the and so on, Hong Kong only began to trans- sociological frameworks offered by Giddens form into an affluent society with the emer- (1984, 1990), Saunders (1986, 1990) and gence of the middle class in the mid-1960s as Dupuis and Thorns (1998) can be used to industrialisation took off (Lui, 2003). link homeownership and home investment Subsequently, the notion of class in Hong strategies to deeper concerns for ontological Kong is largely focused on wealth alone. security. The need for confidence in the con- Only in the last two decades has this middle tinuity of the world around us, captured in class begun to consider accumulating cul- notions of ontological security, relates to the tural capital. physical home and its social, physical and In addition to being a wealthy city-state, financial insurance capacities. The need for Hong Kong’s middle class has long taken a stable social and material environment, pride in financial literacy. Lui and Wong staging the performance of daily routines, (1994) point out that nearly half of the infor- enables us to inhabit beliefs and feelings of mants in their survey owned stocks and for- autonomy as well as lives in which social eign currency bank accounts. Lui (1995) also identities can be constructed more or less argues that the Hong Kong middle class free from surveillance (Dupuis and Thorns, managed to generate wealth through prop- 1998: 29). In this context, homeownership erty ownership, illustrating the resourceful- and forms of financial investment by house- ness of this group by showing that nearly all holds are aspects of social projects designed owned their own residential properties (Lui, to confer relative familial or household secu- 2003: 171). Thus, through the experience of rity in the future (Bauman, 2006). The drive buying and selling properties locally, many to invest actively and internationally by the 2046 Urban Studies 55(9)

Hong Kong middle classes connects to stra- well as enabling shuttling between the analy- tegies deployed in an ontologically unsettled sis of news media and property advertising world, where regional-national politics and found in both London and Hong Kong. the potential for more compromised notions Some informants also brought colleagues, of selfhood emerge as real possibilities friends and partners to take part in the dis- (Bauman, 2000) via possible future state cussion and gather investment trends from controls and economic uncertainties. the researchers. Interviews were also admi- Foreign homeownership in Hong Kong nistered with families who bought properties can be partly understood in personal, class- in the UK in the 1990s. When our partici- based and regional insecurities that have pants permitted recording, interviews were produced socially embedded habits of invest- transcribed (and translated by the first ment and financial securitisation, deploying author when required) for a full qualitative as normative and prescribed practices. Fear analysis that focused on the rationales and and existential anxieties focused on the city- methods of investment strategies carried out state itself, regardless of their potential frui- by Hongkongers and the roles played by tion, propel both property and other invest- main actors facilitating these processes. ment decisions as well as offering a more Some participants declined to allow direct form of potential escape should emi- recorded interviews; in these cases, extensive gration become necessary or desirable. interview notes were typed after the meeting and added to the files for analysis. A further 60 requests for interviews were made with Research approach international real estate consultants and The research was performed using semi- government officials, including Members of structured interviews and participant obser- the UK Parliament, sovereign investment vation at property fairs and development funds and multinational investment firms. sites in Hong Kong and the UK. Semi-struc- Representatives from various London bor- tured interviews were also used to explore oughs and regional development agencies the rationales and methods by which inves- were also invited to participate; given the tors in Hong Kong buy properties in the sensitive nature of this topic, they often UK. Participants were recruited using declined or ignored the requests. searches for relevant key actors and by Finally, we attended strategic meetings accessing personal and professional net- and property fairs organised by property works that enabled snowballing techniques developers in Hong Kong and the UK. to elicit further contacts in what is otherwise Some informants also took the researchers a network with relatively high levels of to attend property viewings and meet estate secrecy and social closure. agents selling various types of homes. The Twenty-three in-depth interviews were analysis of materials including online news- conducted in English and Cantonese at letters, property brochures and newspaper Hong Kong, London, Aberdeen and adverts in both Chinese and English was Liverpool locations. Informants included included in the data gathering and analysis investors, real estate directors, brokers, phase of the project. property developers; regional government strategists and town planners also took part On the motives of investors in this research. The native language skills of the first author proved critical for accessing Despite recent popular media coverage in the and developing trust with critical actors, as UK of wealthy investors from Russia and Ho and Atkinson 2047 the Middle East purchasing prime and super- amidst significant economic expansion prime residential properties in London, the between the 1980s and 1997. Many wealthy history of international property investment Hong Kong parents, concerned about politi- from Hong Kong can be traced back to the cal uncertainty, sent their children to be edu- late 1980s, when Hongkongers began to cated overseas, often to boarding schools in worry about the possible uncertainties after the UK (Jacobs, 2015) and then to universi- the impending 1997 handover. Here we offer ties abroad, including those in Canada, a more detailed discussion of the three waves Australia and New Zealand. Waters (2006, of investment trends, to enable understand- 2010) points out that the children of Hong ing of these motives. Kong middle-class parents have the financial means to access overseas education systems perceived as superior to those in Hong Kong. First wave: The pre-handover migration In the early 1990s, the UK experienced a wave (buy-to-live) recession during which some London prop- The first key emigration wave began after erty developers began to seek foreign invest- the Sino-British Joint Declaration was ment capital, including searching for signed by Deng Xiaoping and Margaret investors from Hong Kong. The real estate Thatcher in December 1984, creating the market in Hong Kong was and still is more first main phase of political uncertainties in expensive than the one in London and had Hong Kong. Citizens began to relocate to generated windfall gains for many in the ter- other countries, including Australia, ritory. At the time, some Hong Kong par- Canada, New Zealand and the US; the stu- ents bought properties in London for dent protest in Tiananmen Square in 1989 housing their children while at university, triggered a second wave of emigration when which tends to be cheaper and more conve- the Chinese government’s aggressive nient than renting. London-based agents counter-response generated further fears. exhibited their developments in property Hongkongers were concerned the Beijing fairs alongside real estate developers from government would apply similar modes of Canada and Australia in Hong Kong in the law and political enforcement to the post- early 1990s to attract Hong Kong investors. handover city-state. The number of people Some observations can be highlighted leaving Hong Kong for residence overseas from the personal characteristics of the doubled between 1987 and 1990 (UNESCO, Hong Kong families who bought properties n.d.). During this period, Hongkongers in London in the 1990s. Waters (2006, 2010) bought properties with the intention of relo- suggests that the desire to accumulate cul- cating, but this was also possible because tural capital is often the driving force moti- many had the finances due to prevailing vating Hong Kong parents with the financial high savings rates among the middle classes, means to support their children’s education a point we return to later. outside of Hong Kong. Parents also showed With the introduction of the Open Door confidence in the UK education system and Policy in China towards the end of 1970s that were implicitly planning their children’s made Hong Kong the only gateway between future should political circumstances change mainland China and the rest of the world, in Hong Kong. many Hong Kong industrialists and entre- Our data suggests that the first wave of preneurs accumulated wealth through the buyers mostly bought with the intention of business opportunities created. Subsequently, personal use – what might be termed buy-to- Hong Kong experienced its wealthiest period live. At this stage, the phenomenon of buy- 2048 Urban Studies 55(9) to-let was still rare, with the occasional the Securities and Futures Commission rental of a spare room to a child’s classmate. (SFC) (an independent statutory body) and In addition, the purchase of London residen- the Hong Kong Monetary Authority tial properties suggested that Hongkongers (HKMA) worked closely with banks to were not averse to taking financial risks ensure investors would be compensated. based on the kind of entrepreneurial mindset During this period, other investments that began taking hold of the middle classes offered a relatively poor return; the Hang at the time. Those who managed to keep Seng Index, the Hong Kong stock market, these properties subsequently saw significant peaked at 30,468 in November 2007 but then capital growth in them. More importantly, dropped dramatically to 11,922 in March the increases in rent and property prices 2009. Since that time, it has never regained around them virtually insulate some of our the levels seen in 2007. Our informants informants with adult children who cur- hinted at their heavy losses, with stocks rently work in London. bought at peak or near peak, and at their international search for investment opportunities. In this context, ‘frying’ properties in Second wave: ‘Frying London wave’ (buy- Hong Kong had become popular, but as the to-fry) cost of properties and stamp duty increased Since three of the most prominent Hong over this post-crash period, investors sought Kong-based tycoons, Li Ka-shing, Lee Shau other investment opportunities outside of Kee and Cheng Yu-tung, have amassed for- Hong Kong. Another important contribut- tunes from investment in real estate and the ing factor to overseas property investment is stock market, there has been widespread that banks in Hong Kong offer almost zero popular focus on emulating methods for interest rates on money deposited, which has generating personal wealth in the culture of the effect of countering the strong the city-state. The diffusion of norms around Hongkonger ethics of thrift and saving rates investment can be indexed by the participa- (GfK, 2016). tion of many Hongkonger secondary school Since the time of the crash, London has students who take summer courses on finan- become an investment hotspot for several cial investment. As one informant offered in reasons. First, some investors hoped to spec- an aside, ‘Even housewives in Hong Kong ulate on the London property market to can have a conversation with you about turn a quick profit. Second, the relative finance and investment’ (11), illustrating that insignificance of state pensions resulted in the popularisation of investment through citizens planning more extensively for retire- various financial instruments has created ment. Indeed, many opted for short-term wealth for ordinary people. poor living standards, reducing their levels Despite the Hongkonger experience of of consumption to secure buy-to-let invest- earlier financial crises (in 1987, 1997 and ments that insure against the risks of being 2003), the credit crunch of 2007 made inves- financially stretched later. In other words, tors much more cautious about their invest- we also need to acknowledge how Hong ment strategies. For example, the collapse of Kong investors tend to own their property Lehman Brothers in 2008 influenced 43,000 and seek additional properties overseas for Hong Kong investors who held ‘minibonds’, investment purposes. This trend has often affecting around $1.8 billion of investors’ been overlooked by the existing literature on money (Duce and Tong, 2011). After Hong middle-class homeownership focusing on Kong investors protested two institutions, how home-ownership is a performance of Ho and Atkinson 2049 class and social mobility (Ariztı´a, 2014). One middle-class respondents show no anxiety about informant commented that her clients lived losing what they have worked for. And when in public housing flats in Hong Kong but asked whether they are worried that someone owned more than one overseas property: will get ahead of themselves, again about three quarters of them express no such anxiety. Indeed, the middle class in Hong Kong histori- They don’t mind their living conditions in cally arose under the umbrella of the colonial Hong Kong, they might even be living in public rule. The middle class has prospered in a stable housing, it’s not about buying for how they laissez-faire economy where competition deter- would want to live, it’s buying purely for invest- mines one’s fate. (Lui, 2003: 171) ment. They want to use their money for something. And a lot of investors don’t really care about the look of the building or the location of We attended property fairs in Hong Kong it. They might care a little bit but what they’re organised by international real estate firms worried about is their numbers. As long as it that took place in conference rooms in five- rents out and they get a good net yield that’s star hotels in the Central area, the heart of what they’re looking for mainly. (14) the financial district. These kinds of fairs tend to market properties in London. In These processes connect with new patterns comparison, the promotion of properties in of tenure, ownership and identity that bridge second-tier cities such as Liverpool and patterns of tenure (Hulse, 2008). Other Manchester took place at less expensive informants indicated the range of methods venues in other parts of Hong Kong, usually used to buy UK properties using capital a showroom converted from an office space released by the re-mortgage of their existing in an office tower block. Potential buyers apartments in Hong Kong. Some even went were presented with residential developments into partnership with family members and by agents using scale models, brochures, friends to help create more stable and long- floor plans and figures on envisaged rental term investments. This pooling of resources yields. Such apartments are usually sold off- echoes Hamilton’s (2006) argument that the plan with timeframes to completion of value of kinship and family has long been between six and 18 months. For pure invest- highly regarded in the Chinese culture, and ment purposes, buy-to-let buyers often chose that sometimes Chinese people do not make apartments with the highest yield, but these clear distinctions between household and were also popular and usually reserved for business activities. This kind of business loyal customers. One interviewee explained practice is sometimes described as Confucius the kinds of investors who may buy a prop- capitalism and focuses on notions of familial erty in London: and intergenerational loyalty, thrift and an ethic of hard work. While many commenta- If they already have children studying in the tors tend to believe that capitalism is a UK then yes, most likely. At the moment, the Western concept that began during the interest rate is really low; it is much cheaper Industrial Revolution in the 19th century, than renting. others have argued that capitalism can be I: What if they don’t have any connections to traced back to the Ming Dynasty (1368– the UK? 1644), at which time these combinations of Then it’s really rare. Usually those people economic and household activity emerged. would have a business in London and then Nevertheless, summarising the behaviour of they would have a property as well. It’s just Hong Kong middle-class investors, Lui that Hongkongers aren’t that familiar with the (2003) suggests that: UK market. They may buy a brand-new UK 2050 Urban Studies 55(9)

Figure 1. A compressed urban imaginary.

property, but they wouldn’t know how to buy terms of some vendors and property inter- an old property. (16) mediaries who operate per a kind of script, detailing the assets and value of particular The marketing of UK properties recently locations through effusive descriptions of transformed and adapted to Hongkonger London as a cultural centre. conceptions of residential real estate. First, In many cases, the imaginary and its properties in Hong Kong have long been scripting by intermediaries were further sold by size measured in square feet, and underwritten by compressing the time-space UK properties are now being marketed simi- geographies of important investment loca- larly; one of our informants noted: tions. For example, Figure 1 shows the relative distance (with respect to time in I think the property market may change. It minutes) from the property development to used to be that this is a one- or two- or three- other important transport hubs and institu- bedroom apartment. They didn’t really have tions, including London City Airport, the the measurement. Now they will ask for the Eurostar terminal, the London School of square foot. They are slowly learning from the Economics (LSE), King’s College London South East Asian market. They never really talk about the size, they didn’t really talk and the British Library. This distillation of about the kitchen and so on. If you compare prime cultural, leisure and arts nodes was the house prices, the difference is huge. (6) used to inform the cognitive geography of buyers – confirming or helping to structure Another crucial factor driving London their mental map of the city and its offer, investment relates to the kind of imaginary either to them as potential future residents of the city cultivated in property advertising or to those who would form potential clients and the descriptions of intermediaries keen as tenants in purchased properties. Here we to advance the unique cultural offering and also see investment choices informed by the ambience of a city that many will never visit. claim of proximity to crucial sites of con- Davies (2016) has discussed the significant sumption, such as the large-scale Westfield roles that the networks of ‘agents’ or inter- shopping mall in Stratford and the shopping mediaries (e.g. body guards, private tutors, and restaurant district in Shoreditch, also an estate agents, art dealers) play in acting on important selling point for Hongkongers behalf of the wealthy individuals in the con- accustomed to a vibrant lifestyle. temporary political economy. Similarly, Rogers (2016b) points out the importance of brokering agents and technologies to assist Third wave: ‘Post-London investment wave’ the super-rich and middle-class investors in (buy-to-let) buying properties in Australia. This was also The use of mental maps and spatial awareness the case for the middle-class investors in can demonstrate that the search for housing is Ho and Atkinson 2051 influenced by ‘the supply in the housing mar- priced market: ‘I think the Hong Kong inves- ket, households’ preferences, and the use of tors are now thinking perhaps London is a bit information channels as well as their interac- too expensive to yield, give them a better yield tion’ (Chen and Lin, 2012: 912). Since most of or something you know’ (8). And: ‘I think one the properties sold to Hong Kong investors . London say over £400,000 in properties it are buy-to-let, the figures on the return of can be a very difficult decision; they have to investment are often more important than the think, consider. Plus, when they see something location. To elaborate, it is acknowledged that £120,000 for something, for that they would buy-to-let investors are merely interested in pay’ (12). the rental income and perhaps less emotional In comparison to the 2016 entry investment about the location of the property (Wallace, cost that exceeds £300,000 in London, inves- 2008). As for gathering information on the tors began to turn to northern cities such as housing market, the availability of open data Manchester, Liverpool and Sheffield, where sources (such as UK Land Registry data) and starting prices were around £70,000, generat- social networks allows potential property buying potential rental yields of between 6% and ers to build up their knowledge of specific 8%. Table 1, from a newspaper advert for a neighbourhoods (Dunning and Grayson, Manchester development as illustrated in 2014). However, although estate agents tend Figure 2, draws on these chief selling features. to be local housing experts ‘in a position to Real estate agents in Hong Kong regularly frame the housing choices of the household by inform their clients of any policy changes selectively revealing information and opportu- made by the UK government that might nities about the area and type of property have an impact on investment strategies. An requested by the household’ (Dunning and example can be seen through the change in Grayson, 2014: 300), our data suggests that the Capital Gains Tax (CGT) regime, where the agents in Hong Kong who sell UK prop- non-UK residents have been taxed on gains erties often have no particular knowledge of made from residential sales since April 2015. the neighbourhoods. With the current Stamp Duty Land Tax Although property prices in London (SDLT) threshold currently set at £125,000 dropped significantly in 2009, values then for residential properties, this simple change doubled by 2016 with the average property made investing in northern cities immediately price now £600,625 (LSL Property Services, more attractive because many properties 2016). However, this generated new anxieties would not cross this threshold. for Hong Kong investors who hesitate to In the past, it tended to be the case that invest due to the perception of risk expressed only Hongkongers who had children studying by informants of an over-valued, prohibitively in the UK bought properties in London, but

Table 1. Key points translated from Chinese to English.

Trendy apartments in the centre of Manchester Ready-built apartments with rental contract are now sold in limited quantity Predicted a 6 to 8% increase of property value in Manchester and the UK in 2014 £800 million worth of capital will flow into Manchester Airport Studio, one- and two-bedroom apartments available Manchester, third largest economy in the UK To provide up to 70% mortgage Prices starting from HK$1,348,529 Fully furnished and decorated 2052 Urban Studies 55(9)

Figure 2. Manchester property development.

the market has opened as developers sell new- The most recent major development, the builds in second-tier cities. According to infor- deliberations around the UK leaving the mants, investors are currently able to buy European Union, raises new anxieties that properties in Liverpool, Sheffield, Newcastle have already had an impact on international and Manchester for between £60,000 and investment flows into London. This has £150,000, and buyers here are more likely resulted in many Hong Kong investors re- looking for buy-to-let investments. Other evaluating their financial strategies. One types of properties such as student accommo- investor pointed out that prior to the Brexit dation can be purchased from as low as referendum, Hongkongers had invested £30,000, with a rental yield of 10% annually. heavily in the property market in London, However, investors are reminded that the Manchester and Liverpool for both rental potential for selling the property is slim income and capital growth. Post-referendum because of widespread availability. investors are generally divided into two Ho and Atkinson 2053 camps. The first are still willing to take risks Hong Kong middle-class (as well as very because of the depreciation of the British wealthy and lower-middle income) investors pound: ‘Post-Brexit the pound has dropped buying homes in the UK. More specifically, significantly, properties for Hongkongers we introduce a typology of three investment have become 10% cheaper [because of the waves to capture the nature of these differen- exchange rate], which has become an attrac- tiated patterns of investment. Perhaps of most tive proposition’ (18). The other camp relates relevance for contemporary concerns with to the more cautious investors: housing and inequality in the city today is the most recent manifestation of these forms of After Brexit, there are many investors in Hong investment with the ‘frying’ of off-plan prop- Kong who now try to find out more informa- erties (buy-to-fry) in London. This became an tion on buying properties in the UK, however, attractive proposition because the prices were the politics has become unstable, the relation- relatively low and allowed investors to gener- ship between the UK and Europe has wea- ate a quick profit. However, the ‘post-London kened, and the whole stock market has become unstable. Hongkongers may hold onto investment wave’ began when property prices any investment plans at the moment. Short rose after the credit crunch in 2009; investors term investors may not be willing to invest . now explore buy-to-let options in northern cit- and they will stop for a moment and have a ies including Liverpool, Manchester and think first. (18) Birmingham with a rental yield of up to 8%. As Harvey (2010) argues, following the 2008 Since Britain has voted to leave the crisis, the costs of tackling losses were distrib- European Union, Hong Kong-based inter- uted to the poor while the elite carried on to national estate agents have reported a record profit from the growing value of their secure level of enquiries regarding buying proper- assets. In the UK housing market, buy-to-let ties in the UK. For Hong Kong investors, and buy-to-fry properties generated profits for however, the fear and anxiety is always investors and left a housing landscape rela- going to be about the overall financial situa- tively inhospitable to those in need of any tion in Hong Kong: form of housing. Hongkongers buying UK properties In terms of fear, stock market, the economy appear driven by culturally-embedded anxi- in China, share prices and the overall econ- eties focused on their own class position and omy in Hong Kong. In terms of anxiety, the by the possibility of future regional instabil- value of the property market in Hong Kong. ities. Experienced through waves of financial Many Hongkongers can’t afford to buy a property. (17) crises, Hongkongers understand financial insecurity as transnational and unavoidable. Thinking like the super-rich, buying proper- Conclusion ties in London is a secure way to safeguard the depreciation of cash, outperform the While existing research and popular media close to zero interest rate deposits and gener- continues to generalise the way that super-rich ate a regular rental income. More impor- global investors buy properties in prime tantly, some investors are not as wealthy as London locations and leave them unoccupied the popular media portray; they save hard (buy-to-leave) for capital growth or to park and access loans to invest for long-term assets, our investigation offers another reading growth, sometimes with friends and family of the London housing shortage that focuses members in ways that resemble Confucian on the mundane realities of investment by capitalism. A second type of fear arguably 2054 Urban Studies 55(9) runs deeper and relates to geopolitical uncer- professionals in Chile. 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