Affluent Chinese pursue overseas properties

Updated: 2013-08-27 23:29

By WANG YING (China Daily)

  Print Mail Large Medium  Small 0

Chinese investors are looking abroad for high-return opportunities as domestic economic growth slows and the yuan continues to strengthen, a study said.

A report released on Tuesday by real estate services firm Jones Lang LaSalle estimated that China's overseas investment will maintain a 30 percent growth rate in 2013, with real estate as a main investment target.

Offshore residential property investment by Chinese high net worth individuals, defined as those with personal assets exceeding 10 million yuan ($1.6 million), is expanding, JLL said.

Real estate has always been the main overseas target of many such investors. Set against strict domestic property curbs and weak equity market returns, overseas markets offer more opportunity.

A stronger yuan makes overseas assets more affordable for Chinese buyers, said Joe Zhou, head of research for JLL East China. The Chinese currency has strengthened about 30 percent against the British pound since 2005, which is equivalent to a 30 percent discount in the price of residential property in the United Kingdom.

Educational systems, high-quality housing, freehold or long-term leasehold residential properties and wealth protection are also key reasons for high net worth individuals to invest overseas, the report said.

These investors' most popular offshore residential property destinations include the United States, Canada, Australia and the UK. Housing prices in the UK have increased 177 percent over the past 15 years, with London prices up about 276 percent.

While major Chinese cities require 30 to 50 percent down payments and have tightened mortgage requirements, down payments on offshore residences may be just 25 percent and interest rates are relatively low. It all means considerable potential for appreciation, according to Zhou.

"From traditional immigration needs to children's education to the value appreciation of assets, we believe that Chinese investors' demand for overseas residential property assets will continue to grow rapidly," said Michelle Liu, head of international residential Shanghai at JLL.

According to Liu, JLL's total sales of residential properties in London to Asia-Pacific region buyers have exceeded 10 billion pounds ($15.5 billion) since 2005, reaching 2.6 billion pounds in 2012 alone.

Only 30 percent of buyers of residential properties in central London are local British. The rest are overseas investors, nearly half of whom are Asian buyers.

A rising number of Chinese developers are investing in overseas property projects, and they now have total overseas projects valued at more than $10 billion, according to China Overseas Investment.

Chinese property deals abroad rose sharply in 2012 to $1.86 billion from $547 million in 2011 and $90 million in 2010, according to data from Dealogic. Excluding Hong Kong, deals last year totaled $450 million, up 46 percent from 2011.

8.03K