Picky Chi­nese in­vest smartly in over­seas res­i­den­tial units

China Daily (Canada) - - DEPTH - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Zhou Yi­lan, 46, owner of a pri­vate firm in Hangzhou, Zhe­jiang prov­ince, heaved a sigh of re­lief when her lawyer called on Jan 8 to say the pa­per­work re­lated to her pur­chase of a house in Los An­ge­les has been com­pleted fi­nally.

“I can rest as­sured and en­joy the Spring Fes­ti­val now,” said Zhou, speak­ing to China Daily shortly there­after.

She spent more than six months to for­mal­ize the LA prop­erty deal. “It was one of the big­gest chal­lenges I have ever ex­pe­ri­enced.”

Zhou is among the many Chi­nese in­vestors who are buy­ing over­seas prop­er­ties to own a more di­ver­si­fied port­fo­lio.

Ac­cord­ing to Juwai.com, an on­line ser­vice of­fer­ing in­for­ma­tion on over­seas prop­er­ties to Chi­nese main­land buy­ers, Chi­nese real es­tate in­vest­ment out­side China has grown from $5 bil­lion in 2010 to $52 bil­lion in 2014, and is set to reach $220 bil­lion by 2020.

Rea­sons abound. As China con­tin­ues to open up its cap­i­tal mar­kets, Chi­nese res­i­dents can con­vert their ren­minbi into other cur­ren­cies like the US dol­lar in greater amounts, and pay for over­seas prop­er­ties in for­eign cur­ren­cies.

Also, Chi­nese in­vestors are bet­ter-trav­eled now than ever be­fore and, hence, ex­posed to more in­vest­ment op­por­tu­ni­ties.

“On the one hand, US prop­er­ties now are more ex­pen­sive than 12 months ago, when I first de­cided to di­ver­sify my in­vest­ments. On the other, if I didn’t buy as soon as pos­si­ble, the cur­rent value ofmy wealth wouldn’t have been re­tained,” said Zhou.

So, she met sev­eral vis­it­ing over­seas prop­erty agents dur­ing their road­shows in China. In late sum­mer of 2015, Zhou fi­nally ze­roed in on a sec­ond­hand prop­erty, a three-bed­room house in sub­ur­ban Los An­ge­les. It cost her $890,000.

Of­fi­cials at global realty firms said Chi­nese buy­ers’ in­ter­est in US prop­er­ties has been in­creas­ing as they think the value of US houses will ap­pre­ci­ate.

Aaron Kir­man, pres­i­dent of the in­ter­na­tional es­tates divi­sion of realty agency John Aaroe Group, said in a re­cent in­ter­view that in­quiries from Chi­nese buy­ers for his high­est­priced prop­er­ties rose 45 per­cent year-on-year in the last quar­ter of 2015.

“I cur­rently have more than a dozen prop­er­ties priced from nearly $15 mil­lion to $135 mil­lion. Ev­ery one of them is get­ting much greater in­ter­est from Chi­nese buy­ers,” said Kir­man.

The US is one of the top over­seas des­ti­na­tions of Chi­nese stu­dents and tourists. Own­ing a US prop­erty helps, es­pe­cially if a Chi­nese par­entcum-in­vestor wishes to di­ver­sify his/her port­fo­lio and buck the trend of yuan de­pre­ci­a­tion.

How­ever, for prop­erty mar­ket pro­fes­sion­als in the US, do­ing busi­ness with Chi­nese buy­ers en­tails chal­lenges.

Scott McFarlane, a prop­erty agent in Hous­ton, said Chi­nese in­vestors are get­ting in­creas­ingly realty-savvy and have a clear idea of the kind of prop­erty they need.

“In the past, (Chi­nese) buy­ers would de­cide to buy a prop­erty just by look­ing at Pow­er­Point. Now, they would like to do on-site re­search, talk to lawyers, prop­erty in­spec­tors and agents, and visit the prop­er­ties time af­ter time be­fore they sign the deal,” said McFarlane.

Lo­ca­tion of a prop­erty is key: Prox­im­ity to a pres­ti­gious school or univer­sity is a big fac­tor. For in­stance, Zhou Yi­lan said she set­tled for the LA house be­cause it is just a 15-minute drive from a lo­cal high school that her daugh­ter will en­roll into next year.

She also likes the neigh­bor­hood of lush woods, and tran­quil, peace­ful sur­round­ings, a con­trast to her apart­ment’s lo­ca­tion in her home­town. In Chi­nese cities, peo­ple pre­fer down­town apart­ments. In the US, peo­ple pre­fer silent neigh­bor­hood, she said.

Other fac­tors in­clude price and size.

Typ­i­cally, Chi­nese buy­ers pre­fer spa­cious prop­er­ties, with at least three bed­rooms, be­cause friends and fam­i­lies of­ten visit.

Since only a few buy­ers are able to ob­tain mort­gage from lo­cal banks, oth­ers must make full pay­ment in cash.

So, a lot of Chi­nese buy­ers pre­fer US prop­er­ties priced be­tween $500,000 and $2 mil­lion, not like in China where they tend to buy the most spa­cious and ex­pen­sive ones they can af­ford, bet­ting on value growth.

An­a­lysts said Chi­nese buy­ers in­creas­ingly sur­vey the in­vest­ment des­ti­na­tions and study each prop­erty.

Henry Chin, CBRE’s head of re­search, Asia-Pa­cific, said Chi­nese in­vestors now re­al­ize the prop­erty mar­ket is quite dif­fer­ent from the stock mar­ket, and that even two prop­er­ties in the same neigh­bor­hood may have dif­fer­ent po­ten­tial for ap­pre­ci­a­tion in value.

“While the stock mar­ket’s per­for­mance of one coun­try may im­me­di­ately af­fect that of an­other, the same can’t be said of the prop­erty mar­kets. So, it re­quires a lot of re­search for in­vestors to de­cide,” said Chin.

CBRE’s re­search showed most Chi­nese buy­ers of US prop­er­ties are not driven by the po­ten­tial for value ap­pre­ci­a­tion or rental re­turns. In­stead, they buy prop­er­ties forownuse or for theirUS univer­sity-bound chil­dren.

“For this rea­son, tra­di­tional pop­u­lar des­ti­na­tions, in­clud­ing Los An­ge­les, San Fran­cisco, NewYork andWash­ing­ton, are still the hottest des­ti­na­tions. For peo­ple seek­ing rich yields from prop­erty in­vest­ments, sub-premier lo­ca­tions can be a good op­tion,” said Chin.

Most Chi­nese in­vestors pre­fer new prop­er­ties to used homes even though used homes in the US do not need much re­fur­bish­ment. The key cri­te­rion is, homes must be dec­o­rated, and in a ready-to-move-in con­di­tion.

An­other strik­ing fea­ture is Chi­nese buy­ers tend to buy prop­er­ties that are not dis­tant from their fam­i­lies’ or friends’ homes. Some­times, a group of buy­ers vis­its newly de­vel­oped prop­er­ties to­gether and buys ad­ja­cent units, to be­come neigh­bors in the fu­ture.


A man con­sults with an em­ployee of Jimu.com, an In­ter­net-based in­vest­ment tool, at a fair in Bei­jing.

1. Down­load the Tiger­bro­kers app on your hand-held de­vice or PC

2. Fill out your per­sonal in­for­ma­tion (name, ID card num­ber, e-mail ad­dress, mar­i­tal sta­tus, oc­cu­pa­tion, em­ployer, etc)

3. Fill out your fi­nan­cial in­for­ma­tion (net as­sets, an­nual in­come af­ter tax, aim of in­vest­ing in US stocks, ex­pe­ri­ence in trad­ing stocks)

4. Sign the app’s on­line con­tract

5. Up­load an im­age of your ID card and sig­na­ture

6. Wait for the bro­ker’s eval­u­a­tion The ap­proval will be granted in one work­ing day if you meet the el­i­gi­bil­ity cri­te­ria

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