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Strategic Priorities: Where are Chinese Buying Properties in the World?

Strategic Priorities: Where are Chinese Buying Properties in the World?

Chinese are the most avid property buyers globally. From billionaires to middle class, they are literally buying in all continents. Geopolitical and economic events from recent years have made their purchase behaviors changing in preferences.

Tighter capital controls in People’s Republic of China (PRC), yuan depreciation, the economic slowdown in the country and Sino-US trade war escalation are making Chinese shifting from traditional big destination markets, namely in the US, Canada, and Australia, to other places increasing in popularity for real estate investments.

Japan and Cambodia in Asia; the United Kingdom, Portugal, Spain, Greece, Cyprus, and Malta in Europe; Dubai in the Middle East, became the darling of Chinese buyers. Singapore is experiencing a revival of interest, while Turkey starts to raise attention. Germany and France retain popularity.

Their motivations are either to obtain residence/citizenship, attractive rental yield and capital gain, or a better quality of life. A stable political environment, freedom of speech, pollution escape, and educational model also contribute as key factors. As well, many Chinese heavily consider the future of their offspring to make a purchase overseas.

Remaining in Asia

Japan is one of the most desirable markets in Asia. Top cities like Tokyo and Osaka are drawing enthusiasm from Chinese buyers – the majority for investment – due to the inexpensive and easily managed properties with attractive rental yield and capital gain prospects within 5-10 years.

Many are looking for houses or condo units at a US$200K-US$600K price range.

Low inflation rates and strong demand make the property market like a good investment in both cities. They also become highly attractive for buy-to-rent investments due to the sharp rising of inbound foreigner tourists.

Tokyo will host the Summer Olympic Games next year, and Osaka will accommodate the World Expo in 2025. Such events assure an increase of inbound tourists in both cities, which coupled with insufficient hospitality services to face the demand, will benefit investors aiming to have their freehold properties rented out as short-term lodging through the online service Minpaku, or Airbnb-style room lettings.

The first casino resort in Japan is set to open in Osaka around 2024-25. The one million-square-meter casino and conference center will be on the eastern side of the city, in Yumeshida, or “Dream Island.” The neighboring lands in Osaka Bay Area will rapidly increase in value. A pace that most certainly will follow slower on the opposite side of the city due to the considerable distance.

Even so, the northward Central Business District of Umeda and the southward entertainment and shopping area of Namba will greatly benefit from both tourism and the forthcoming acclaimed sports and cultural events scheduled for the country.

Overall, Japan is a model for the quality of life that many Chinese are enthusiastic about. Furthermore, a considerable number are attracted by skiing overseas, thus, having Japan as a top destination, which is partially driving the foreign real estate investment in the country. In this regard, Hokkaido (Niseko in particular) and Nagoya are gaining momentum in property enquiries made by potential Chinese buyers.

Cambodia is becoming highly attractive to Chinese buyers, which is enhanced by the PRC President Xi Jinping’s “One Belt, One Road” (OBOR) initiative. As part of spreading China’s political and economic influence across the region, OBOR is leading to massive infrastructure investment in Cambodia, including the financing for new roads, highways, power plants, airports, and others.

Such developments are contributing to make Sihanoukville a sort of a newborn Chinese enclave where developers from mainland China are taking this golden opportunity to spread their investments with property developments ranging from hotels and casinos to condominiums and commercial buildings. As a result, more and more Chinese are buying in Cambodia, either for living or investment purposes.

In short, the country is proven a safe bet in terms of real estate investment. Cambodia remains in the top 10 “Fastest Growing Countries” in the world, with an average growth rate of 7% in the last 14 years. Moreover, the rental yield is very much attractive since it can go up to 15%, while real estate property prices are still low in comparison to other Southeast Asian countries. On top of that, Airbnb is an open option for any potential landlord.

The tense and violent demonstrations in Hong Kong after the controversial extradition draft bill submitted to the LegCo (parliament) has led mainland Chinese big spenders to return to the property market in Singapore. They are choosing the Lion City over Hong Kong due to the social unrest in the Special Administrative Region of China and as a safe bet against the Sino-US trade war.

Cooling measures introduced July last year in Singapore, such as increasing additional stamp duties for foreign buyers to 20% from 15%, have reduced demand. Nowadays, Chinese investors are back to the prime residential areas, such as the traditional District 10, and raising interest in District 7. They are ahead of wealthy Malaysian and Indonesian buyers.

The Old Continent

Whenever Chinese consider buying in Europe, they always have in mind the good rental income and rising property prices. Another factor is education. Therefore, the UK, Germany, and France are the obvious popular choices, since it’s where the majority of Chinese students in the Old Continent are concentrated, also where investment conditions and property safety factors rank high, China’s popular property website Juwai.com states.

Despite the referendum over the Brexit in June 2016, the UK remains a prime destination in Europe for Chinese buyers. According to Juwai.com, enquiries about UK properties exceeded those of Germany and France put together. Homes in the price range of US$250K to US$500K are of particular interest regarding the latter two countries.

The website also noted a 63.79% increase in UK-property enquiries from 2018 to Q1 this year, with many looking at homes in the US$50K-US$250K price range. Furthermore, buyers from mainland China accounted for a third of all real estate purchases by foreigners in London last year.

It is expected house prices to rise steeply in the next five years in cities including Manchester, Birmingham, Edinburgh, and Liverpool. Rents will also increase between now and 2020, which will attract buy-to-rent investors, Juwai.com forecasted last month.

Another lure to Chinese buyers is the “golden visa” scheme, which is available in 20 of the European Union’s 28 member states. Depending on the country, investing the amount between €250K in Greece, and starting from 2 million pounds, or about €2.2 million in the UK, qualifies investors to have residency, and in certain cases to obtain citizenship and passport.

Portugal is one of the most popular destinations for Chinese buyers under the advantageous “golden visa” scheme – it has by far the most flexible options in Europe. The country is highly appraised by the wonderful weather, pleasant beaches, friendly native people, great landscapes, gastronomy, and beautiful monuments.

The cost of living is much lower than countries like the UK, France or Germany. Portugal is the fourth most peaceful country in the world, according to the Global Peace Index by Institute for Economics and Peace. Besides, crime rates are low.

An investment of €500K in real estate in Portugal will gain a residency permit for a family including dependent children; therefore, allowing all a visa-free travel throughout the Schengen zone. A reduced option of €350K is available for any approved property by SEF [Foreigners and Borders Service, in English] or any old property needing renovation works.

Furthermore, a “golden visa” is obtained if a property value at least €280K is purchased in a lower density area. Citizenship can be applied after five years under certain requirements. Another lure for Chinese buyers, they don’t need to spend any time living in the country.

Since the program was introduced in October 2012, the Chinese represent the biggest group with 4,291 residences granted, followed by Brazilians with 764, Turks with 347, South Africans with 299, and Russians with 263. Of the 7,583 residence permits issued until June 31 this year, 7,150 were through real estate purchases, 417 through transfer capital to Portugal and only 16 through the creation of ten or more jobs in the country.

Portugal became a trendy destination to buy a place in the sun after celebrities purchased properties not only in the major cities of Lisbon and Porto but also in other places such as the famed Alentejo and Algarve regions. Music star Madonna has purchased and is living in Lisbon with her four kids. Actors Michael Fassbender, Scarlett Johansson, Monica Bellucci, and fashion designer Christian Louboutin have also chosen the Portuguese capital for their real estate investments.

Neighbor Spain is another attractive destination yet far less popular than Portugal in terms of “golden visas” granted through properties.

A Spanish residence permit can be obtained when buying a property worth at least €500K. Since 2013, when the scheme started to run, over 3,300 residence permits were issued after buying a property.

Chinese investors lead the way with 1,230 visas, or 37.5% of the total issued. They are followed by Russians with 870 (26.4%), and Ukrainians with 124 issued (3.8%), Rusol Prime Real Estate & Lifestyle mentioned last March. The bulk of properties bought through the program are in Barcelona, Madrid, and Malaga.

Haven in Southeastern Europe

Idyllic Greece is the new haven for Chinese investors attracted by low prices, warm weather and the advantage of getting a residence permit in return for at least €250K investment in real estate.

No minimum stay in the country is required, and investors granting residence have immediate access to Schengen zone. Nevertheless, citizenship is granted after seven years living in Greece.

Launched in July 2013, the Greek “golden visa” scheme awarded 4,145 main applicants, of which 2,416 are Chinese. Russians ranked second with less five times, or 428 residences issued, recent figures show. The majority of “golden visa” property investments took place in the capital region, namely in Athens, Piraeus and Pallini municipalities.

Another hotspot for Chinese buyers is Cyprus. 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 for Chinese buyers. Cyprus also does not impose property stamp duty and dividend taxes, South China Morning Post states.

Buying a property worth at least €2 million grants investors and family members to obtain Cyprus passports with full rights like traveling and working in any of European Union member states.

If the residential property is bought from an investor who had previously used the property to apply for Cypriot passport thought the citizenship program, the amount rises to €2.5 million. Investment must be kept for five years.

It is also required donations of €75K each to Cyprus’ Research and Innovation Foundation and the Land Development Corporation. Permanent residency can be obtained at lower cost by investing €300K into a property.

While there is no official data on nationalities that have bought property in Cyprus, according to South China Morning Post, industry insiders said mainland Chinese and other Asian investors accounted for more than half of these transactions.

Malta is another European country gardening interest from Chinese buyers, especially millionaires attracted by its lifestyle and property investment opportunities. A €650K donation to the National Development and Social Fund is required. It is also mandatory for the main applicant either to make an investment of at least €350K in property purchase in the country or rent a property with a minimum annual rent of €16K.

Additional purchase in bonds or stocks, worth at least €150K qualify main applicants to obtain citizenship under the condition to keep the investment for five years. Maltese passport gives access to Schengen zone member states. Residency is also available under a property purchase of at least €320K (€270K in South Malta or Gozo) or renting a property of €12K yearly (€10K in South Malta or Gozo), among other requirements.

Emerging Market in Bosporus

With tensions experienced between the US and other countries, such as China, it is expected Chinese citizens to turn their investments to safe countries like Turkey.

Turkish government is looking to the real estate sector as one of its prime resorts to boost the country’s economy, which was driven for years by a construction boom.

A weak Lira and the government effort to ease the path to Turkish citizenship is drawing special attention to investors primarily from the Gulf region, but also Asia, Europe, and North Africa.

Citizens from Iraq, Kuwait, Saudi Arabia, and Russia are among the biggest foreigner buyers in Turkey last year, which is following suit in 2019. It is estimated that the Chinese will rank the top 10 within the next few years.

Turkey is now a desirable destination not only for vacations but also Chinese businessmen seeking investment opportunities; to launch joint venture projects between the public and private sector, or to support trade between Turkey and China under the OBOR framework.

Naturally, more and more Chinese will choose to live and work in Turkey. Others will be lured to invest in property aiming for citizenship. In this regard, the success of “golden visa” schemes in the European Union among Chinese investors may draw many other citizen fellows to purchase a property in markets like Turkey, namely in Istanbul, Antalya, Ankara, Bursa, and Yalova.

Since new investor visa scheme came into effect in Turkey last September, citizenship is offered to foreigners who purchasing a property in the country or several with the combined value of US$250K from US$1 million previously (or the equal value in Lira or Euro). The amount has been reduced on the condition to not sell the property within the next three years.

Turkish citizenship and passport not only are granted to the investor (main applicant) but also the family members – spouse and children below 18 years old. Obtaining citizenship allows traveling to 117 countries or territories that not require a Visa for Turkish passport holders.

Middle East Oasis

Uncertainties with ongoing Sino-US trade war and Brexit turbulence are making a considerable number of Chinese buyers to seek opportunities in other non-western and less saturated markets such as the United Arab Emirates (UAE), Juwai.com mentions.

The OBOR initiative and the strengthening of economic and trade ties between PRC and the Gulf state made the number of Chinese expats to rose slightly above 50% in Dubai over the last five years. It is estimated around 230,000 are now living in UAE.

Several UAE initiatives are making the cosmopolitan Dubai, the second-largest city in the emirate, a hotspot for Chinese investment. One is the last-year approval of visas without a sponsor for five years for those who invest at least 5 million dirhams (US$1.36 million) in a property, which can’t be purchased with a mortgage. The five-year retirement visas are meant to target expats aged 55 and older.

The 10-year visas are also available for those who provide a minimum investment of 10 million dirhams (US$2.72 million), but only 40% of that can be in real estate. In both cases, it’s mandatory to keep the investment for at least three years. Furthermore, visas can be renewed.

Such measures, coupled with the UAE’s zero-tax regime, are luring wealthy Chinese investors to seek for the best real estate opportunities in Dubai. Ready to move, and off-plan properties, are appealing to Chinese who are driven by location, rental yield and selling prices for their purchase decisions.

A current average rake in rental yield of around 5.9% contrasts with China’s gross rental yield of 2.1%, the Global Property Guide figures show. The Khaleej Times reported Downtown Dubai, Greens, and International City the three most popular areas among Chinese buyers.

Some Chinese will invest in property for own use in Dubai, but most buyers are investment-oriented, trying to hedge the risk they are exposed to in the Chinese market by investing in overseas properties which provide better yields, Juwai.com states.

About 60,000 units are scheduled to be delivered in 2019 and 2020, hence, it is expected home prices in Dubai to decline by at least 15% to 20% more, industry experts say.

Experts also say that Dubai’s prime property prices per square meter are more affordable than its global peers like New York, London, Hong Kong, Paris, Mumbai, and others. Chinese may be lured to buy in Dubai either by selling their properties in higher-priced markets like California or New York or having the emirate’s cosmopolitan city an alternative way for parking their money rather than in mainland China.

Thailand’s Current State of Affairs

In the last decade, Thailand was considered a prime destination for a real estate investment among mainland Chinese. The country even experienced a great demand from China’s middle-class buyers, as they regarded Thai property as a solid investment.

A strong Thai baht, bank loan curbs, and the new loan-to-value (LTV) rate are now pushing the property market to a plunge of purchases both by Chinese and Thai people. Thai’s currency value is taking a heavy toll on the Chinese facing a depreciation of yuan. LTV and bank loan restrictions are affecting many Thais aiming to buy either first or second and subsequent homes.

Despite the decreasing number, the Chinese still account for the main group of foreigners buying properties in the Kingdom. They are moved by the quality of many projects, especially in Bangkok, Pattaya, Phuket and Chiang Mai, where they meet with well-being amenities and modern lifestyle offers.

If you need any further help or want to have a chat with us, please feel free to write an email to daniel.O@angelrealestate.co.th. We will be more than happy to discuss and support your international real estate investment.

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Daniel Oliveira

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