For Hong Kong nationals, purchasing a UK investment property just got a whole lot easier. Jane Drew reports
The Zurich Property Deposit Guarantee (PDG) is a financial guarantee made on the buyer’s behalf to developers or vendors. It enables investors to delay paying a cash deposit on their UK investments until the property is complete, and is available for any period from six months to five years, and to a maximum of £500,000 (HK$7.7M) in deposits covered per investor.
Instead of having to hand over the 10 percent or 20 percent cash deposit usually required to secure an off-plan property in the United Kingdom, the investor will simply pay a guarantee fee which is typically much cheaper than borrowing from a bank. The premium to secure the guarantee costs just 4.99 percent of the value of the deposit for a 12-month term.
Take this typical scenario: instead of having to put down £50,000 today for a £500,000 house, you would only have to pay £2,495 (plus a small administration fee of £188). As Paul Gratton, one of the driving forces behind the scheme says, “you can secure UK property without tying up your cash in the process.”
Gratton, former CEO of Egg, the world’s largest pure online bank, set up XBond in 2007 to launch the PDG in the United Kingdom, with an eye to making it a global brand. He had noted that 90 percent of new-builds in Australia are purchased using property developers’ bonds, and that there was a burgeoning market in Canada. “We felt there would be a demand for PDG,” says Gratton, “and through our relationship with Zurich we made it possible.” XBond’s link up with Zurich Financial Services, a global financial services giant and one of the largest insurers of developers in Europe, is clearly making developers (as well as consumers) feel comfortable.
The PDG is already a huge success in the United Kingdom: all the major developers, including Barratt, Persimmon and Redrow, have signed up to offer the guarantee to their potential customers. This means there are now more than 110,000 new homes in the UK where the guarantee can be used, representing more than 60 percent of the new homes’ market.
By launching here this month, XBond looks set to revolutionise how we in Asia invest in properties in the United Kingdom: a huge plus given that Hong Kong buyers, attracted by the market’s transparency and low taxation, invest around £3 billion a year in off-plan and new-build UK properties. Gratton points out that, “60,000 of Hong Kong Chinese are educated in the United Kingdom, so we weren’t surprised that, in the first advertisement we ran this month, 50 percent of interested applicants were potentially looking to buy property for their kids at university.”
Local interest is particularly high at present due to plunging UK property prices, and the opportunities being provided by the ongoing rejuvenation of London’s east-side in anticipation of the 2012 Olympic Games. “The PDG would be a good bet for someone looking for something that will come up in four years time,” says Gratton. “It’s a good way to get in early.”
The good news is that the application process is smooth and simple and rapidly guarantees the deposit to the seller – meaning that buyers can act very quickly to secure the property they want. The qualifying process is designed to ensure that applicants are creditworthy and can cover the amount of deposit required. You can even apply online: www.thexbond.com.
Gratton sums up, “The Zurich PDG is fast becoming one of the most sought-after new financial products and interest has been very high. As well as launching in Hong Kong and Singapore followed by moving quickly into Europe and other overseas markets, the product should also be available to Irish nationals wishing to buy property within a couple of months.
“The obvious place to go would be to provide the service to Hong Kong nationals looking to buy in Hong Kong, he concludes.
