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Rich Chinese go on a buying spree abroad
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THE Chinese, awash with cash and seeking new investment channels, are on an overseas buying spree, splashing out money for property in the United States, Canada, Europe, Australia and even Japan.
According to the Hurun Report, one in every three wealthy Chinese owns property offshore. Chinese investors are forecast to fork out US$29 billion this year on overseas real estate, according to international property consultants Jones Lang LaSalle.
That would be almost double the 2014 figure. About a third of that investment is in residential property.
Samantha Gu, 53, who works in public relations for a state-owned company in Shanghai, is a face behind the statistics. Her husband works for a Japanese company in China and her son is studying in Tokyo. Since the family has permanent residency status in Japan, Gu wanted to buy an apartment there.
“I checked out some flats in Tokyo. Even in downtown areas, the price is not as high as I expected,” she says. “After retirement, I might want to live in Tokyo. It’s a good time to invest.”
Indeed it is. Japan’s decades of deflation have squeezed the bubble out of the property market, and the yen has declined by a fourth against the Chinese yuan in the last five years.
Gu eventually bought an 80-square- meter flat apartment in the Minato ward of Tokyo, priced at about 100 million yen (US$817,500). That is about a quarter less than the cost of a comparable apartment size in downtown Shanghai.
“Even if I don’t live there in the future, I can always rent it out,” Gu says. “My agent told me that the rate of return could be 10 percent.”
Jones Lang LaSalle said people from China’s mainland have invested about US$84 million in private apartments in Japan since 2011.
“The new investors have helped push the prices higher in the bigger cities,” David Free-Morgan, global capital markets research director at Jones Lang LaSalle, told the Japan Times.
Chen Sijin, a Chinese-Canadian finance expert, cited on his Weibo microblog a Canadian friend complaining about the rocketing housing price in Toronto caused by increasing number of wealthy Chinese buyers.
“Because of you Chinese, the property price here has risen four times,” the Canadian banker complained. He said it’s even not easy for a middle-class like him to purchase a house now.
The Chinese are buying up overseas property for many reasons. Some want to build a base for children’s education. Some want better returns than paltry bank deposit rates. Some want more security than the volatile domestic stock market can offer. Some may even be moving “dirty” money out of China amid a crackdown on corruption.
“Most of my clients buy flats to support their children studying here,” says Leo Sun, who has worked as a real estate agent in Sydney for eight years. “If people buy a house and rent it out, they can cover all the living and study expenses of their children.”
There is always the downside to consider.
Property, like any investment, can drop in value. The Japanese learned that lesson in the late 20th century, when their US$78 billion spree of buying US properties crashed in a recession.
“It is different this time,” Wu Xiaobo, a well-known finance writer, said in an early interview. “Chinese buyers are more interested in bottom fishing the residential property market so that they can enjoy an appreciation on investment to help their children study or their family to migrate overseas.”
Then, too, there is the risk of backlash. In countries like Britain and Australia, the Chinese are being blamed for skyrocketing home prices that make housing unaffordable for local first-time home buyers.
Although the criticism has been debunked by many property experts, the sentiment lingers. Australia has acted to tighten restrictions on foreigners purchasing property.
The housing market in cities such as Melbourne and Sydney is “crazy,” Sun admits. “Both ordinary flats and luxurious beach houses are being snapped up by Chinese buyers. Many of them are buying for investment.”
Money is even lowing into relatively smaller countries like Greek and Cyprus, where economic problems have caused a slump in property prices,
“I sold 130 properties last year in Greece to Chinese people,” says Wang Xiaoqing, a property management agent based in Athens.
People who spend a minimum 250,000 euros (US$278,400) on a flat in Greece can acquire a five-year residency permit for the European Union two months after the transaction is completed. As long as they hold the property, they can apply for renewal of residency.
“This policy has attracted many Chinese buyers since it was initiated in 2013,” Wang says. “About 80 percent of the them don’t live actually here, but they have residency rights and can travel and stay in Europe any time they want.”
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