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Chinese and overseas property: A generational choice
By Juwai, 10 July 2015
While Xi Jinping has a China dream1, thousands of Chinese have dreams of their own – many which are increasingly rooted in a growing desire to invest in legacy home overseas.
This phenomenon is not new. Born from their yearning to anchor both their current lifestyle aspirations and those of future generations, such dreams have led droves of Chinese – known to be savvy investors and entrepreneurs – to heed their deep rooted family ties and make many decisions with family in mind.
What fuels Chinese buyers’ hunger for property abroad?
The answer is: OPPORTUNITY.
In the past, such opportunities were unprecedented and unheard of. Chinese were simply not allowed to invest overseas. It was only till recent years that such opportunities have emerged, and the Chinese global buying spree that we see today is but the very tip of the iceberg.
With a keen eye for opportunity and investments that will yield positive returns and enhance their lifestyles, Chinese have been looking overseas for years. Many who have already relocated abroad to achieve such dreams.
At the end of 2012, independent estimates put the size of the overseas Chinese population at approximately 50 million.2
Real estate investments are the most preferred investments for Chinese, and to find one with good returns overseas is a no-brainer. After all, such legacy homes can be passed down for generations to come, as well as furthers the opportunity for their children to go abroad for education and explore new business ventures – all in one fell swoop.
Now that’s killing (more than) two birds with one stone.
50 million Chinese abroad…and counting2
Singapore, Malaysia, and Thailand account for a lot of Chinese abroad – approximately 20 million, in fact – but the Chinese population overseas is also growing rapidly elsewhere.
For example, a total of 8,960 mainland Chinese applied for EB-5 visas in the US in 20143, taking the total to 24,330 for the last five years. Other countries, such as the UK4, Australia5, and New Zealand6 are also seeing similar growth.
Judging by the looks of it, this phenomenon is going to become more prominent in the future. The Chinese government is making it easier for residents to invest overseas7, foreign governments are easing visa rules8, and businesses are increasingly catering to this lucrative market by offering extended services to smooth the flow of investment.
While status-symbol luxury properties are one aspect of the demand side, lifestyle opportunities and the chance for future generations to enjoy the benefits of overseas residency are a fundamental part of the picture – something absolutely necessary for you to understand if you are selling to this market.
#1 Schooling is ruling
There is no better expression of long-term investment in the future of the family than in education. Chinese have always highly valued education, and education hotspots, such as the US, the UK, and Australia are some of the most sought after by Chinese investors. Why education? It’s simple. Education benefits the entire family – whether financially or otherwise – as it can put future generations on an upward trajectory in society.
Here are some pointers to note:
#2 Setting up businesses overseas
Investors are broadening their horizons to not only include locations with good educational opportunities, but those that also offer longer-term prospects for business development. Demand from Chinese investors are increasingly diversifying to range from dairy farms9 and vineyards10 to new factories11, which shows an progressively sophisticated market that is also being led by plans to set up overseas businesses.
#3 Long-term ownership for long-term plans
Long-term investment horizons rely on long-term property holdings, and this is one area where China falls short compared to overseas markets. In reality, investment in a residential property in mainland China doesn’t give outright ownership rights.
Terms on ‘ownership’ are limited to a maximum of 70 years, meaning you effectively lease the property from the government for that period.12
In contrast, many overseas properties come with perpetual ownership terms (such as freehold) that can be passed down across generations. This is a crucial difference between China and overseas markets, which offer greater security to investors seeking generational investments.
Know your customer
While the ancient Greeks reckoned it was important to ‘Know Thyself,’ in order to catch the wave of property investment from China, it’s absolutely vital to know your customer.
If your property is in a market that offers good schooling options or shows significant economic growth and new business opportunities, make sure these aspects are in the limelight!
Catering and selling to the long-term aspirations of Chinese investors requires many things but understanding the key motivations listed above are as good a place to start as any.
Sources: 1. China Daily; 2. Wikipedia; 3. SCMP; 4. UK Office for National Statistics; 5. Australian Department of Immigration and Border Protection; 6. New Zealand Migration Trends and Outlook report; 7. Mingtiandi.com; 8. Financial Times; 9. Australian.com; 10. SCMP; 11. International Business Times; 12. China Economic Review