Signs show Chinese investors are eager to continue snapping up U.K. residential and commercial properties, with the post-Brexit slide in the pound among the factors enticing buyers.

The vote for the U.K. to leave the European Union has smashed the value of the pound lower against its rivals. And that is encouraging potential purchasers of luxury homes and commercial buildings in London to overlook the uncertainty around Brexit, real-estate professionals have found.

“There have been a lot of drags on the property market in recent months,” including the referendum, said Bernie Morris, president of the U.K, Europe and Middle East region for Chinese online property portal Juwai.com. “But that is exactly why the weaker pound has come at the right time. It’s summer, and the Chinese are coming.”

Property inquiries by potential Chinese buyers in the weeks right after the June 23 referendum were about 30% to 40% higher than the 2016 average, according to Morris.

But they are not “emotional buyers,” he noted in his emailed comments. “They are looking for a bargain, and they have long-term faith in the U.K.”

The well-regarded educational system, London’s position as a leading global financial center and a perceived higher level of safety compared with other EU countries is what attracts Chinese investors to the U.K., said David Wei, London-based managing director of Affinity Sunny Way, an overseas investment arm of Affinity Global Real Estate.

“I’ve seen recent data showing a 10% increase in Chinese people traveling, and lots of them come to buy property,” said Wei during an interview at his office in the upscale Mayfair neighborhood in London.

“A few companies dealing with [property investment] from China in the U.K. have become really busy, and they’ve had to hire more people,” he added.

Return on investment

Low borrowing rates have been a factor in pulling in buyers, as the U.K.’s benchmark interest rate was held at a record low of 0.5% for seven years. Now, the base rate has been driven even lower — to 0.25% — as part of the Bank of England’s aggressive monetary stimulus plan unveiled last week.

Another consideration is the total return on investment, or ROI, on rental properties. In Greater London, for example, ROI from 2010 through 2016 averaged between 15.7% to 18.9%, according to LendInvest, an online property and lending platform.

Those factors may be why investors from the China/Asia-Pacific region made up as much as 23% of those purchasing new residential property in London in the past 18 months, according to Savills, a real-estate services provider. That would put them and buyers from the Middle East and North Africa as the biggest groups of foreign investors.

But a more recent factor is the foreign exchange rate. Sterling slid nearly 12% against the Chinese yuan GBPCNY, +0.55% in the days following the June 23 Brexit vote. It’s since recovered some ground, but has yet to return to the level of around 9.88 yuan that it was at on referendum day.

The pound “is 10% cheaper and, for lots of Chinese people, this is a big discount,” said Wei.

Juwai’s Morris also believes interest in U.K. property has been “definitely boosted” after the Brexit vote, driven primarily by the pound’s fall against the U.S. dollar and the Chinese yuan.

Read rolling coverage of Brexit from Financial News.

A discount helps when U.K. properties can carry hefty price tags. The average house price, for example, was £211,230 ($278,837) in May, up 8.1% from the year-ago period, according to the Office for National Statistics. In London, that average is more than double as prices run at about £472,000.

Sales of “some luxury properties — like one-bedrooms for over £1 million — have been a little bit slow. But for Chinese people, they love these kind of deals,” said Wei.

Beyond homes, roughly £1 billion in retail property was bought in central London in the first half of 2016, leapfrogging the average of £700 million purchased in the same period in recent years, according to figures released this week by commercial property consultant CBRE. It expects to see another £450 million worth of deals to be completed in August.

Read:Wells Fargo buys new headquarters in London after Brexit vote

Even before the pound’s slide, “you’ve had money coming out of China because the [yuan] had started to depreciate. So as a result, you’ve had quite a number of wealthy individuals ... wanting to invest overseas and a lot of mainland Chinese individuals buying properties in London,” said Ken Wong, a Hong Kong-based Asia equity portfolio specialist at Eastspring Investments.

Security trumps prices

But price isn’t everything, said Wong. As he pointed out, buying property isn’t the same as going shopping on popular London retail destinations Oxford Street or Bond Street.

“Chinese investors who purchase real estate ... only get bullish when there’s an actual market for it. When there’s positive sentiment, then you do see them come in flocks,” Wong said.

Signs of stability in the U.K. — such as how smoothly the government is running under the U.K.’s new Prime Minister Theresa May — are what investors want to see in the wake of the Brexit vote, Wong has found.

“When you’re expecting a person to buy an apartment in Hyde Park, for them, they’ve got to make sure this is a safe investment,” he explained.

That became a concern after the post-Brexit drop in sterling raised worries that would hurt the value of real estate already held by investors.

Several U.K. commercial property funds temporarily halted withdrawals after the Brexit vote. As anxiety about the market mounted following the surprise referendum result, investors ramped-up requests to pull their money from the funds. But to return the money, commercial properties within the funds would have to have been sold off quickly and at deeply reduced prices.

See:What investors fleeing U.K. properties are getting wrong

This week, CBRE said it has tracked a 3.3% decline in the value of U.K. commercial property market in July, as the “Brexit vote has now crystallized that expectation,” of a pullback in capital value growth. Capital value refers to how much would have likely been paid for a property on the date of its valuation.

CBRE

There had been signs of increased caution toward in the real-estate market before the Brexit referendum. A Juwai.com survey found 51% of investors and property professionals looking at Chinese investments in the U.K. waited to do deals until after the outcome was known.

And in the runup to the vote, new-buyer inquiries in the U.K. fell to the lowest level in six years, according to the Royal Institution of Chartered Surveyors. Its survey in June also found a majority of real-estate professionals expect sales to fall in the next 12 months — the first time in four years that the outlook has turned negative. The supply of properties coming up for sale also logged the steepest decline on record.

Good returns in future

But Wei said he doesn’t believe the prospect of Brexit was the main reason for recent slowing in the market. He pointed to new “stamp duty” tax rules that came into effect April 1. Buyers of second homes and buy-to-let properties now have to pay an extra 3% in stamp duty on top of current tax rates.

Still, “lots of Chinese investors I talk to who buy ... hotels and office buildings have confidence in the U.K. economy. At the moment, with this 10% discount ... we’ll have a good return in the future,” he said.

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One of the most recent deals seen in London from the commercial front was the £42 million purchase of a Travelodge hotel by Y.T. Realty Group, run by Chinese property mogul Zhang Songqiao, announced in July.

Read: Here’s where luxury-home buyers are landing — and it’s not all New York, London and Hong Kong

Wei recently spoke about Chinese investment in the U.K. in the House of Lords, or the second chamber of the U.K.’s Parliament, reflecting the importance of the housing market to Britain’s economy, as well as the role played in it by overseas buyers.

“Now that the U.K. is leaving the EU, obviously that’s a huge loss. But [we think] it will bring a stronger relationship between the U.K. and China,” he said, noting that the U.K.’s new Treasury chief, Philip Hammond, visited China in the wake of the referendum. Hammond was sounding out the prospect of a new free-trade deal with the world’s second-largest economy.

“The Chinese government has invited young leaders from the U.K. to talk about future business,” said Wei. “So I can see the two governments working hard to make this relationship better.”