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European 'secondary real estate markets' attractive to Chinese buyers

Chinese buyers flock to Europe in search of alternative investments as Sino-US trade war continues.

In light of US President Trump's escalating trade war with the world, Chinese property buyers who were once heavy investors in US real estate are now looking at alternative destinations to park their money.

Policies in both China and the US are pushing this shift, as lawmakers act to protect their industries or prevent capital outflow. All of this impact where Chinese property buyers choose to invest next.

European countries that are attractive to Chinese buyers

Lately, Europe has seen renewed interest amongst Chinese buyers. Despite the spectre of Brexit since the referendum in June 2016, Chinese investment in the UK does not appear to have been greatly affected. According to property consultancy Knight Frank, Chinese still represent the largest group of foreign buyers in many top European real estate markets, with the UK remaining a prime destination.

According to Juwai.com, enquiries about UK properties exceeded those of Germany and France put together. The website noted a 63.79 per cent increase in UK-property enquiries from 2018 to the first quarter of this year, with many looking at homes in the USD50K-USD250K price range.

Though Brexit did cause potential Chinese buyers to pause for a while, in 2018 the trend started again. In London, for instance, buyers from mainland China still account for a third of all real estate purchases by foreigners last year.

Cities in the UK in which house prices are expected to rise steeply in the next five years include Manchester, Birmingham, Edinburgh and Liverpool. Rents are also expected to increase between now and 2020, hence attracting buy-to-rent investors.

Chinese buyers of German and French properties are also rising steadily. Juwai.com reports that France saw a 183.4 per cent increase in enquiries from 2017 to 2018 while Germany registered a 73.1 per cent increase for the same period. Homes in the price range of USD250K to USD500K are of particular interest.

Ireland is another destination attracting many Chinese viewers. Juwai.com noted a whopping 566.7 per cent rise in enquiries from 2018 to the first quarter of this year with many intending to invest for own use. Industry experts believe Chinese interest in Ireland could stem from uncertainties over trading, currency and political uncertainties in the UK.

Italy, Malta, Portugal, Netherlands and Spain, meanwhile, also showed steady increased enquiries.

But the biggest attraction of late has been Greece. Lured by low prices, warm weather and the advantage of getting residency status under the Golden Visa programme, the country has become the darling of Chinese buyers.

According to Juwai.com's data, enquiries about Greece doubled in the first quarter of 2018 and jumped three-fold in the second.

Another hotspot garnering attention lately for Chinese buyers is Cyprus. Enquiries jumped 364.3 per cent from 2017 to 2018 on Juwai.com. Relatively low costs, avoidance of bureaucracy, sunny weather and short time frame – up to six months – for receiving a passport under the Golden Visa scheme make Cyprus extremely appealing to Chinese buyers. Cyprus also does not impose property stamp duty and dividend taxes.

What motivates Chinese to buy in Europe

Besides good rental income and rising property prices, another motivation for Chinese to buy in Europe is education. Britain, Germany and France are popular because that’s where the majority of Chinese students in Europe are concentrated, and where investment conditions and property safety factors rank high.

Affluent Chinese parents are known for pulling out all the stops to secure a bright future for their children. Investment in their children's education is a priority because children represent the future of the family tree. And a good home at a convenient location close to the university where their child is studying ensures that future plans for the children are being taken care off.

Another lure is the Golden Visa programme. A golden visa is provided when a person invests in a country and is given a visa that would not otherwise be available. In time, this can often lead to citizenship.

Out of the 28 European Union member states, 20 offer 'golden visas'. The real estate investment to qualify for the visa scheme, depending on the country, can be as low as the equivalent of 250,000 euros (in Greece) to millions (British residency starts at 2 million pounds, or 2.3 million euros).

The UK is currently seeing a rise in Chinese buyers looking for 'golden visas'. Tier 1 visa (which since May this year, has been replaced with the UK Innovator Visa and Start Up Visa) applications by those prepared to invest USD2.65 million in the UK are up by 46 per cent this year, reported the South China Morning Post, with Chinese continuing to be the most common applicants.

At the end of the day, industry experts say real estate investment is about long-term commitment. As such, European properties, from a Chinese investment portfolio management standpoint, are still highly attractive because they continue to be well-functioning assets, no matter the costs.

Sources: 1:South China Morning Post: Chinese investors turn to Cyprus property in search of sunshine and EU passports; 2. South China Morning Post: Asian investors pouring money into Europe’s real estate and logistics property markets