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A Union flag flies from a pole as construction cranes stand near skyscrapers in London. Hongkongers have bought more than 7,000 homes in the UK since China imposed a security law in Hong Kong on June 30. Photo: Agence France-Presse
Opinion
Concrete Analysis
by Raymond Chong
Concrete Analysis
by Raymond Chong

For Hongkongers, a trusted developer is key when pursuing a dream home in the UK market

  • Buyers should make sure that stage payments and a watertight legal agreement are in place. It is advisable to appoint your own lawyer, rather than accepting one recommended by the developer
  • Hold the money in escrow until stage payment conditions have been met
Raymond Chong
Raymond Chong
Why you can trust SCMP
Since the UK unveiled its new British National (Overseas) passport policy three months ago, more than 7,000 residential properties have been sold to Hongkongers alone, sources say. Engaging a trusted developer is key to a hassle-free experience.

Unlike Hong Kong, where most developments are built by large developers and the quality can be assured, the UK market is tougher to assess for first-time investors. In emerging cities like Manchester and Birmingham, qualities can vary among small to medium-sized builders who dominate the scene.

Among buyers of new homes, more than half of them have experienced major structural problems with their properties, according to a Guardian report. From weak mortar to faulty drainage and cracked windows, anyone would not have imagined that houses with these “features” would last for more than 30 years.
Stories about estates being left in limbo or abandoned, after the developers went into administration, or simply “disappeared,” are not uncommon, especially in Manchester and Birmingham – two of the favourite cities for Hong Kong buyers.

03:14

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These issues have quickly turned into a series of nightmares for many new owners. The British government has recognised these shortcomings, branding the property market as “broken” in a white paper published in 2017.

Performing due diligence on the developer is a crucial step in avoiding these potential debacles. One objective measure is provided by the Housebuilders Federation (HBF), whose member firms account for 80 per cent of all new homes built in England and Wales.

Hongkongers applied for British National (Overseas) passports in record numbers in 2019 as protests rocked city

The federation conducts an annual customer satisfaction survey, awarding developers a rating from one to five stars based on the responses. Buyers of newly-built homes are recommended to go for those with at least four-star rating. Investors should be aware that the scheme will not cover builders outside the HBF membership.

After screening the developers, buyers could turn to Homeviews in the next step. The site is one of the most popular platforms on property developments, where reviews are verified residents. Buyers can search for a history of past projects, read the residents’ comments on developers, and assess the quality of their developments.

A woman looks at advertisements in an property agent window in southwest London. Photo: EPA-EFE

A good tip would be to look out for tales of woes by residents. Past performance usually can predict the future, and this can help buyers skirt costly pitfalls.

What if there is not much information about the developer on the internet? The place to turn to is the Companies House website hosted by the UK government, where one can access the profile of property developers, their incorporation history, accounts and the principal office bearers.

One should be very cautious if the developer has only operated for a few years and has committed very little start-up capital. In my past industry experience, I have seen developers injecting a few pounds only as initial capital.

There is a misperception among Hong Kong buyers that a fully completed project offers a fuss-free investing experience, compared with an off-plan property development. In some cases, issues can appear after moving into the new abode, requiring owners to deal with the developers.

Minor issues would snowball into a bigger problem and owners may be saddled with a large bill to pay for the fixes. Just because a project is already completed does not mean buyers should compromise in choosing a reputable developer.

Berkeley, SelectProperty Group and Salboy are among UK developers who regularly market their property projects globally from local offices in other cities and countries. Prospective buyers in Hong Kong should get more information from their showrooms if they have one in the city.

Using Google Earth is one of the best ways to inspect the site of an off-plan property, especially by lesser known developers. Buyers should not be enchanted only by beautiful CGI imagery in the marketing brochures. I have personally come across some sites that did not show up on the map.

It also pays to be cautious about offers or promises of unattainable rental guarantees or future buy-back schemes. It could be a sign of a developer running short of cash, and the need for cash flows to fund the development.

When in doubt, buyers should make sure that stage payments and a watertight legal agreement are in place. Hold the money in escrow until stage payment conditions have been met.

Last but not the least, is advisable to appoint your own lawyer, rather than accepting one recommended by the developer.

Raymond Chong is managing director at mortgage referral brokerage StarProp Agency

This article appeared in the South China Morning Post print edition as: Checks on U.K. home developers can pay off
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