Image: Pennie Smith, Ray Lowry, The Clash, CBS & Epic
"London calling to the faraway towns" declared The Clash in their 1979 hit song. In the days when rock stars were proper rock stars, the album cover famously featured Paul Simonon smashing his guitar against stage of the New York Palladium. Over four decades later, the siren call of London to the 'faraway towns' may seem peculiar in an era where Covid has swept the land and shutdown city centres, with none more affected than London.
How quickly London recovers from this is hard to say with some sources suggesting around 700,000 (95% of which are foreign born) having left the city in the second half of 2020. We think the vast majority of these are likely to return once the vaccine is more broadly rolled out, travel restrictions are eased, businesses re-open and tourists return. With all the over 50's expected to be vaccinated by early May, we expect this re-population process to begin around the middle of 2021. Furthermore, there is a strong case the UK economy could be one of the fastest growing in the developed world as we exit the pandemic - with our world leading vaccine programme ushering in a wave of foreign direct investment and employment growth. Nevertheless, it seems credible that some of those who have left in 2020 may never return. The question then is will this gap be filled, and by who?
Step forward Hong Kong. In 2020 the UK government granted Hong Kong British National Overseas (BNO) passport holders the right to live and work in the UK for a period of 5 years with a "path to citizenship" within 6 years. The scheme came into effect in January 2021.
Home Office statistics show approximately 5.4 million Hong Kong residents are eligible for the scheme out of a population of 7.5m. Estimates of how many HK citizens may arrive in the UK vary widely with the Home Office central case at 300,000 (6% of those eligible) and a high of 1,050,000 arrivals (19%). Independent sources have suggested figures beyond the top end of the Home Office's estimates, with some pointing to the Home Office's poor track record in predicting immigration trends.
The question also is how many of these are likely to settle in London? Figures from the The University of Oxford's Migration Observatory show 35% of the UK's foreign born population lives in London. However we believe there are strong grounds to suggest that in the case of Hong Kong citizens this figure may be higher for the following reasons:
Employment Opportunities in Finance and Tech: The City of London and Hong Kong are two of the world's leading financial centres. Similarly London and Hong Kong are among the world's leading cities in technology with London being regarded as the "Tech Capital of Europe" and Hong Kong having a long history of technological innovation and enterprise. It would seem logical then that London's specialisation in this fields will act as a pull for Hong Kong citizens looking to emigrate.
Well educated and higher earners: A recent survey by HongKongers in Britain (HKB) showed that of those intending to take up the BNO scheme 71% have university degrees and their mean income is 52% higher than the median Hong Kong salary. As London tends to attract a disproportionate number of higher earners and university degreed educated professionals, it seems likely that London will attract more than the usual share.
Similar Cities and Life-styles: Both London and Hong Kong are bustling, multi-cultural cities with a lively social, restaurant and nightlife scene. In the UK only London can offer a similar lifestyle to Hong Kong.
The table below looks at a range of scenarios relating to HK citizens settling in London. If we take the Home Office's central estimate of 300,000 UK arrivals, then this would imply 150,000 HK citizens settling in London (at 50%). At the higher end, 1 million HK arrivals to the UK would equate to 500,000 HK citizens moving to London:
Of course it is impossible to say with any certainty how many HK citizens will settle in London over the next few years. However there are good reasons to suggest that perhaps 40% or 50% of those who emigrate may settle in London. At the very least this should act to offset the negative impact of Covid on Londons' population and dampen the notion that London property prices are set to dive as inner cities depopulate in the coming years.
About: Ludgrove is a research-driven London property buying agency, sourcing properties for home-owners, investors, family offices and developers. The company is the only UK buying agency that conducts in-depth research into the Prime London property market and their research regularly features in The Times, Forbes Magazine, Property Week, PrimeResi, Mansion Global and others. As well as conducting searches for homeowners, Ludgrove sources and appraises off-market apartment blocks and development opportunities, adding considerable value to Investors and Developers. The agency is ranked one of the top UK buying agencies by Prime Resi. CEO and Founder Fraser Slater is a former Real Estate Analyst and Fund Manager. His former fund WDB Capital was one of the best performing Funds in Europe during the Financial Crisis. Co-Founder Isabella Slater is an interior designer.
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