In­vest­ing glob­ally for knowl­edge

More and more Chi­nese par­ents with chil­dren in schools and col­leges are snap­ping up prop­er­ties over­seas

China Daily European Weekly - - Front Page - By WANG YING in Shang­hai wang_y­ing@chi­

Since time im­memo­rial, Chi­nese fam­i­lies have at­tached great im­por­tance to ed­u­ca­tion. In the dig­i­tal age, ed­u­ca­tion has grown into a highly val­ued ser­vice, the prox­im­ity to which can send res­i­den­tial prop­erty val­u­a­tions sky-high.

But that’s not an en­tirely new trend. A story traced back to 365 BC has the mother of the great Chi­nese philoso­pher Men­cius mov­ing home three times to en­sure an en­vi­ron­ment con­ducive to her son’s ed­u­ca­tion.

Chi­nese par­ents con­tinue to seek out apart­ments near high-rank­ing pub­lic schools. Such prop­er­ties, be they in China or over­seas, com­mand pre­mium price tags, in­dus­try in­sid­ers say.

In re­cent years, well-off Chi­nese fam­i­lies have been buy­ing homes over­seas. Such in­vest­ments not only se­cure stable re­turns, but also help in­vestors’ chil­dren en­roll in rep­utable schools abroad, they say.

Hao Yue, a re­alty agent with Dou­glas El­e­ment Prop­erty in New York, says her team has han­dled up to 20 home deals in the sec­ond quar­ter, about 20 per­cent more year-on-year.

Buy­ers of all the New York homes are Chi­nese from the Chi­nese main­land and Hong Kong, with a few from Tai­wan and Sin­ga­pore.

Hao cred­ited the growth to the in­creas­ing de­mand from Chi­nese fam­i­lies with chil­dren who have reached the age, gen­er­ally 11 to 18, for study­ing abroad.

“Only a few el­e­men­tary or mid­dle schools of­fer board­ing, so buy­ing a home in a district with good schools is a nat­u­ral choice for Chi­nese par­ents who like to plan their chil­dren’s ed­u­ca­tion in ad­vance,” says Slevin Wang, direc­tor and joint head of in­ter­na­tional res­i­den­tial projects at CBRE China, a prop­erty ser­vices com­pany.

Sky­rock­et­ing home prices on the Chi­nese main­land, cou­pled with prospects of stable re­turns on in­vest­ment in over­seas prop­er­ties, have fu­eled the de­mand. “The re­turn on over­seas hous­ing in­vest­ment can re­coup part of the tu­ition fee, so why not pur­chase a piece of prop­erty in the UK or the US? Well, that seems to be Chi­nese par­ents’ think­ing these days,” says Zhou Yu, direc­tor of Sav­ills China’s in­ter­na­tional res­i­den­tial sales.

Lisa Weimin Liu, gen­eral man­ager and real­tor of Long River Re­alty, which deals in prop­erty trad­ing busi­ness in Mary­land, Vir­ginia and Washington, says, “About 10 per­cent of the over­seas stu­dents I know have their own prop­erty.”

Ac­cord­ing to Liu, it takes more than $1,600 (1,380 eu­ros; £1,280) to rent a room near the Univer­sity of Mary­land, and some stu­dents choose to buy a house and share the rooms with other stu­dents.

CBRE data show that Sin­ga­pore is ranked as the most expensive city for ren­tal, cost­ing $2,960 per cal­en­dar month, on av­er­age, trailed by Lon­don ($2,810), Abu Dhabi ($2,558), Los An­ge­les ($2,544), Rome ($2,497) and New York ($2,422).

To be more spe­cific, an­nual home rents in New York can reach 53.6 per­cent of a mid­dle-in­come fam­ily’s earn­ings, while those in San Fran­cisco can reach 48 per­cent and Los An­ge­les 44.3 per­cent.

It will cost nine years’ av­er­age salary to buy a house in Washington, and a me­dian new house in the US is sized at about 200 square me­ters, ac­cord­ing to the of­fi­cial mi­cro blog of the US em­bassy in China.

In 2017, more than 600,000 Chi­nese stud­ied abroad, the largest such com­mu­nity glob­ally, ac­cord­ing to data from the Min­istry of Ed­u­ca­tion. In the past four decades, a to­tal of 5.19 mil­lion Chi­nese stud­ied over­seas.

Among all des­ti­na­tions, the United States is the most pop­u­lar coun­try, where 350,000 Chi­nese stud­ied at uni­ver­si­ties and col­leges be­tween 2016 and 2017, up by 6.8 per­cent yearon-year, ac­cord­ing to a re­port from the In­sti­tute of In­ter­na­tional Ed­u­ca­tion.

Liu Yiqi, head of in­ter­na­tional res­i­den­tial prop­erty ser­vices with JLL Shang­hai, says the up­trend started in 2010, and in the past two years, the vol­ume of prop­er­ties bought over­seas by Chi­nese dou­bled year-on-year.

Pre­vi­ously, most of the prop­er­ties over­seas were bought by high net worth in­di­vid­u­als, but re­cently mid­dle-class Chi­nese have been more in­ter­ested in over­seas prop­erty, ei­ther for in­vest­ment or for chil­dren’s ed­u­ca­tion.

In ad­di­tion to the ris­ing num­ber of deals, the time taken by a Chi­nese client to clinch a res­i­den­tial prop­erty deal is also be­com­ing shorter, re­alty agents say.

Ear­lier, ne­go­ti­a­tions would last al­most a year. Now, deals are done over just a cou­ple of days, says Hao, the Dou­glas El­e­ment Prop­erty re­alty agent. “Re­cent buy­ers had done good home­work be­fore they came to us, and they know ex­actly what they want.

“I still re­mem­ber, three years ago, only 10 per­cent of my clients sought to buy res­i­den­tial prop­er­ties. The rest in­tended to lease. Now, buy­ers have more than dou­bled to 20 per­cent plus.”

An­other change is that Chi­nese par­ents who de­cided to let their chil­dren study abroad are be­com­ing more so­phis­ti­cated, as they shift their fo­cus from car­ing about rankings of the school to car­ing about the in­ter­ests and ad­van­tages of their chil­dren, says Liu of JLL.

Across the world, fac­tors that in­flu­ence prop­erty pur­chases in an area are high den­sity of good schools, English-speak­ing peo­ple, state of the coun­try’s econ­omy, and whether lo­cal ed­u­ca­tion is val­ued highly.

So, the United States, the United King­dom, Aus­tralia and Canada have emerged as some of the most pop­u­lar des­ti­na­tions for Chi­nese stu­dents for over­seas study, ac­cord­ing to Teng Zheng, deputy gen­eral man­ager of Shang­hai CIIC Ed­u­ca­tion In­ter­na­tional Co, a con­sult­ing com­pany for over­seas ed­u­ca­tion.

The blue book of global tal­ent on China’s over­seas ed­u­ca­tion says the top des­ti­na­tions are the US, Canada, Aus­tralia, Ja­pan, South Korea and the UK.

Among them, pub­lic schools in the US and the UK are pop­u­lar be­cause they share some sim­i­lar­i­ties with pri­mary and mid­dle schools in China.

Un­der China’s nine-year com­pul­sory ed­u­ca­tion sys­tem, con­sist­ing of six years of pri­mary school and three years of ed­u­ca­tion in mid­dle school, an en­trant is not al­lowed to pick pub­lic schools and can only en­roll in a school near­est to his or her home.

In the US, neigh­bor­hoods are viewed in terms of fixed school dis­tricts, which can be de­fined by streets or even by house ad­dresses. There are about 15,000 school dis­tricts across the United States, and the ma­jor­ity of them have good-qual­ity ed­u­ca­tion rang­ing from kin­der­garten to 12th grade, or mid­dle school.

Home­buy­ers need to pay a prop­erty tax for own­ing a prop­erty in the United States, which ranges from 1.2 per­cent to 2.5 per­cent an­nu­ally from re­gion to re­gion, ac­cord­ing to Liu of JLL.

The prop­erty tax in a district with good schools will likely be higher, since the ex­tra tax is col­lected to fund ex­penses like school build­ings’ ren­o­va­tion, fa­cil­i­ties, and wages for top-qual­ity teach­ing staff.

Fam­i­lies in the UK pay a house price pre­mium of al­most £44,000 ($57,200; 48,900 eu­ros) on av­er­age to make sure their chil­dren live within the “catch­ment” of pri­mary schools rated “out­stand­ing” by Of­sted (the UK’s Of­fice for Stan­dards in Ed­u­ca­tion, Chil­dren’s Ser­vices and Skills), ac­cord­ing to an anal­y­sis of the catch­ment ar­eas of 50 state-funded Bri­tish pri­mary schools con­ducted by on­line es­tate agent HouseSim­ple.

An­a­lysts warn that school-minded Chi­nese in­vestors may face cer­tain risks when buy­ing res­i­den­tial prop­er­ties over­seas.

Liu, of Long River Re­alty, says prop­er­ties in dis­tricts with good schools are more like a hedge whose value re­mains stable even dur­ing a bear mar­ket. “The out­look is pos­i­tive for the fore­see­able fu­ture,” she says.

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