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China investors in 2015: Real estate outlook

By Juwai, 05 January 2015
golden week china

2014 was a year that saw major transformations that shook the world...

...sparking a global boom encompassing overseas property investment, outbound travel, and emigration – all intertwining to form a symbiosis of trends propelling each other.

Here, we examine some top trends as we head into 2015.

 

Chinese outbound tourism is set to skyrocket

54.1 million Chinese travelled overseas within the first six months of 2014 – a leap from the 98.19 million throughout the whole of 2013.1 Seeing as several countries – including top destinations like the US and Japan – have relaxed visa regulations for Chinese, Chinese travellers will undoubtedly surge in 2015.

With that in mind, economies around the world should rejoice.

According to a China Tourism Academy report, the end of 2014 should see about 116 million Chinese tourists globetrotting and spending $155 billion overseas.2

Need we say more? For countries hankering to attract Chinese visitors, it’s time to up your game in the battle for Chinese money.

 

Hotel luxury and commercial investments to escalate

The growing wanderlust of the Chinese has not only stimulated global economies – 1.8 million Chinese visitors contributed US$21 billion to the US economy in 2013 alone3 – but also spurred luxury hotel and commercial investments by Chinese conglomerates in gateway cities.4

News of several iconic hotels, landmark and major commercial buildings being acquired by Chinese buyers stirred the industry worldwide.

The most recent of these is the purchase of Hoyts Group, Australia’s second biggest cinema chain worth around $1 billion, by China’s 149th richest man, Sun Xishuang.6

Other notable purchases by Chinese investors included:

  • Waldorf Astoria in New York – US$1.95 billion4
  • Marriot Champs-Elysee in Paris – US$468 million4
  • Canary Wharf building in London – US$1.35 billion4
  • Lloyd’s Building in London – US$388 million4
  • Edificio Espana building in Madrid – US$358.6 million14
  • Louvre Hotels Group in Europe – US$1.49 billion5
  • Sheraton on the Park in Sydney – US$401 million4

With the relaxed outbound investment rules by China’s Ministry of Commerce, we foresee more commercial investments to come in 2015.

 

Chinese outbound property investment set to soar

More and more Chinese are venturing to park their cash in property overseas…but where next?

In the US, NAR data show Chinese buyers spent US$22 billion on American property – a figure that shot up from US$12.8 billion in 2013.3 Shifting away from the perennial favourites such as California, though, there will be new destination rising to the forefront of Chinese buyers’ attention in 2015.

Washington, for example, shot up in popularity with Chinese buyers in 2014, particularly Seattle. This is largely believed to be due to its close proximity to China and a Chinese blockbuster movie titled “Beijing Meets Seattle”, which gave the destination a good deal of exposure to the China market.

(Read more on how Chinese media and celebrities impact overseas investment here.)

Japan also seems to be increasingly popular with Chinese buyers. An up-and-coming investment and travel destination, Japan has received nearly $230 million in real estate investments from Chinese buyers and corporate investors – 3x more than last year.7

Driving factors include the declining yen and 2020 Tokyo Olympic and Paralympic Games, which spurred a deluge of Chinese tourists and subsequently propelled investments in vacation homes – 2.01 million Chinese visited Japan between January-October 20148, an 80.3% surge from 2013.

Europe, however, should be the star of 2015. Emigration will play a huge role in driving property investment in Europe, which we’ll explain further in the next section.

 

Chinese look further beyond for emigration destinations

While the US remains the American dream for Chinese, the lure of obtaining European citizenship has grown increasingly popular.9 This trend becomes more apparent with traditional favourites raising the bar for Chinese emigration hopefuls.

Canada’s new Immigrant Venture Capital (IIVC), which only now accepts only 50 wealthy migrants each year, effectively shutting out 45,000 wealthy Chinese applicants previously on Canada’s wait list. The UK government also doubled the minimum investment amount for its Tier 1 Investor Visa Scheme to £2 million (US$3.13 million).9

Here’s a quick lowdown on hotspots in Europe to watch in 2015:

  • Portugal: Europe’s top investment immigration destination, 85% of Portugal’s 1,936 Golden Visa beneficiaries were from China.10 Rising interest came from its now stable Golden Visa programme and its relatively cheap properties, such as Lisbon’s Chiado or Avenida da Liberdade, which are 25x cheaper than London’s Bond Street.12 In fact, one in five foreign property purchases in Portugal within the first nine months of 2014 were from Chinese.11
     
  • Greece: Property prices declined by 37.8% since 200910 in Greece, which recently announced a new 3-generation citizenship visa for US$250,000 in a bid to attract more HNW investors.11 Should a proposed new policy be approved, Chinese investor immigrants will also be able to receive full Greek citizenship (and subsequently full EU advantages) within seven years. Enough said.13
     
  • Spain: One of Europe’s top second-home destinations, Spain has seen its property prices slide 30%-50% since 2013, leaving a slew of prime properties to snatch up at a steal. 2015 is also the 40th anniversary for diplomatic relations between China and the EU, and a new round of economic stimulus plans set to take effect in 2015 will mean potential opportunities and economic recovery for Europe.10
     
  • Hungary: The only European country from the Schengen immigration programmes that only needs six months (as opposed to a five-year wait in other countries) for permanent residency, Hungary offers an investment immigration plan that can even be completed entirely in China and does not even require applicants to reside in Hungary! Although its price was for 2015 increased to €300,000, Hungary offers an alluring option to wealthy Chinese.10  
     
  • Bulgaria: With a lower investment bar and the offer of accelerated citizenship, Bulgaria is an attractive option for Chinese investors who are keen to settle in the UK but balk at the UK visa price hike.9
     
  • Italy: Boasting a rich culture and history, excellent educational offerings and generous benefits, Italy is undoubtedly an attractive option for Chinese buyers. Property value is also apparent, with Rome and Milan as safe and secure cities to invest in. However, complex Italian policy may hinder Chinese immigrants, so Italy remains a conundrum.10

Besides Europe, Australia will also be popular with Chinese – even more so now that it offers a Premium Investor Visa that promises permanent residency within a year in exchange for A$15 million (US$13 million).9 Read more about it here.

 

International agents – your next step

For international agents interested in tapping into this audience of Chinese buyers, it’s a brand new year, so start off with a bang in 2015!

Chinese New Year Golden Week is just around the corner, and wealthy Chinese often property hunt while on holidays abroad, so there is no better time than now!

When it comes to international buyers, online is the place to start. That’s where they turn to when researching properties and destinations of interest, so make sure your listings are uploaded, up to date, and visible online – behind China’s Great Firewall.

Not sure if you’re seen behind the Firewall? Learn more about it and how you can leverage it to market to Chinese buyers here.

Until then, Happy New Year again and may 2015 bring you boundless opportunities and success!

 

 

Sources: 1. China Tourism Academy; 2. Bloomberg; 3. SCMP; 4. Mingtiandi.com; 5. WSJ; 6. The Sydney Morning Herald; 7. WSJ; 8. SCMP; 9. Wealth-X, 10. 广州日报-大洋网; 11. Portuguese Real Estate Professionals and Brokers Association; 12. Bloomberg; 13. OPP Connect; 14. Mingtiandi.com