Residential property abroad alluring to Chinese
Print Edition
Real estate has always been the main investment target for many Chinese HNWIs due to multiple factors that mainly include a restriction on home purchases in China, the prolonged weakening of the stock market and the appreciation of Chinese yuan.
Slowing domestic economic growth, tightened housing policies and the appreciation of the Chinese yuan are making Chinese high net worth individuals increasingly look into the offshore residential markets to maintain and grow their personal wealth, according to a latest report released by global real estate services provider Jones Lang LaSalle.
High net worth individuals refer to those with personal assets that can be invested exceeding 10 million yuan (US$1.63 million).
“As outbound capital flow has increased in recent years, the attractiveness of diversified offshore investment to HNWIs has grown significantly, causing rapid growth in overseas investment,” said Michelle Liu, head of international residential, Jones Lang LaSalle Shanghai.
“Among all overseas investment, real estate has always been the main investment target for many Chinese HNWIs due to multiple factors that mainly include a restriction on home purchases in China, the prolonged weakening of the stock market and the appreciation of Chinese yuan.”
The most popular offshore residential property investment destinations for Chinese high net worth individuals include the United States, Canada, Australia and the United Kingdom, where the future outlook for investment appreciation is very strong. For instance, housing prices in the UK have increased 177 percent over the last 15 years, with London’s growth even more impressive, up 276 percent.
Moreover, while major Chinese cities have 30 percent to 50 percent down payments and higher loan rates requirements, down payments on offshore residential property can be only 25 percent and the maximum loan-to-value ratio can reach 75 percent. With relatively low interest rates, the potential room for future appreciation is considerable.
“From traditional immigration needs, children’s education to the value appreciation of assets, we believe that Chinese investors’ demand for overseas residential property assets will continue to see rapid growth while the proportion of their assets allocated globally will also keep rising in the future,” Liu said.
London, as the first-choice city for many Chinese residential property investors, has maintained a strong growth momentum and offers many favorable conditions for foreign buyers, making it the best choice for avoiding risk and making a profit, according to Jones Lang LaSalle, which has completed sales of residential properties in London to Asia Pacific buyers exceeding 10 billion pounds in value since 2005.
The city’s main advantages include:
• No restriction for foreign buyers to keep or sell their properties.
• Chinese buyers can save nearly 30 percent due to the appreciated exchange rate between yuan and the pound.
• Foreign buyers do not need to pay property tax or value added tax, which maximizes their investment returns.
• Foreign buyers can apply for housing loans, with the lowest interest rate being as low as 3 percent and the loan coverage ratio as high as 75 percent.
• Most properties are freehold or long-term leasehold.
• The complete system of legislation and taxation, together with a convenient purchasing procedure, enables easy transactions.
According to Jones Lang LaSalle’s 2012 investor purchaser profile survey results, only 30 percent ofbuyers of residential properties in central London are local British, while the remaining 70 percent are overseas investors and nearly 35 percent are Asian buyers.
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