Chinese real estate investment overseas is at an all-time high, with Chinese buyers now the fastest growing segment of real estate buyers globally. Rising incomes, good educational resources and living conditions, ROI in property and permanent ownership of property are all the main reasons why these buyers invest their money in properties around the globe – particularly in the US, Australia, Canada and the UK.
The latest data from the US Real Estate Agency Association shows that Chinese are responsible for 24% of the total transaction amount generated by international real estate sales in the region. From March 2014 to March 2015, buyers from China (including Hong Kong and Taiwan) spent an incredible 22 billion US dollars on property in the country thereby exceeding spending from any other foreign country.
Chinese are responsible for 24% of the total transaction amount generated by international real estate sales.
In the UK, Chinese mainland buyers are now spending 5 times more on property in the region than they were just three years ago. The head of JLL’s International Residence Department said, during a media interview at the end of 2014, that Chinese mainland buyers now own 10% of residential housing in London, a 400% increase from the 2% hold they had in 2011.
In the 2014 financial year, China took the top spot as the largest source country for proposed investment in Australia, contributing AUD $27.7 billion of proposed investment as recorded by the Foreign Investment Review Board. Simon Henry, chief executive of international property website Juwai, estimated that Australia could expect growth of 15-20% in international purchases of Australian real estate in 2015-16.
Despite national concern that foreign investment was driving housing prices up, a Federal Parliamentary Committee report into affordable housing and foreign investment (released in November 2014) found that housing supply issues would in fact worsen if foreign investment was reduced.
Foreign investment is keeping prices lower and increasing demand for the supply of new homes, boosting the economy through the construction jobs, spending and tax revenues generated by these investors. But the benefits aren’t all in the favour of the foreign countries these individuals are investing in. Chinese consumers are heading overseas to purchase property as they seek a safer, more reliable alternative as a result of the downturn of the domestic real estate industry, the slow-down of economic growth in the region and the limits of procuring domestic residency houses set by government policy.
But how do we keep attracting buyers from China? To understand how to attract them, we first need to understand who they are and what they’re looking for. Whilst every buyer is different, there are three kinds of buyers, according to Juwai IQ Research and Q1 2014 data from Fang.com;
- Type One: Mainland Chinese buyers who are currently located in Mainland China but are looking to purchase property overseas. The primary purchasers in this group are situated in Mainland Tier 1 Cities (Beijing, Shanghai, Guangzhou and Shenzhen) with 36% of all Chinese citizens purchasing property overseas coming from these regions (as reporting in the Q1 2014 data from Fang.com). Buyers from Tier 2 and 3 cities hold around 63.54% (an increase of 11 points from 2013) showing that these individuals are increasingly interested in purchasing property overseas as well.
- Type Two: Chinese citizens currently living overseas who are looking for a property in another international country (for example, Chinese citizen living in the US but looking for a property in Australia).
- Type Three: Domestic Chinese buyers living outside of China who are looking for property in their current country of residence.
These three types of buyers all have different needs and wants; however, the combined research from Juwai IQ and the Q1 2014 data from Fang.com shows that there are a few key factors each of these buyers tends to be aware of when deciding which properties to purchase. These are the factors which they consider “logical” and “pure common sense” and include:
In the US, buyers are mostly interested in big cities such as Los Angeles, New York and San Francisco (according to Q1 2014 data by the International Data Monitor Department from Fang.com), with 17% of all sales occurring in those regions. Other popular destinations include Seattle, Boston, Houston, Chicago, Miami, San Diego and Washington DC.
In Australia, the top five destinations for Chinese buyers are Sydney, Melbourne, the Gold Coast, Brisbane and Canberra.
Sydney and Melbourne are the most attractive regions for these buyers, especially as these cities are also the most popular for Chinese immigrants.
Queensland’s Gold Coast and Brisbane regions are becoming increasingly popular with these buyers due to their pleasant living environments and Canberra, the nation’s capital, is also an attraction for overseas buyers due to its safe and high quality social environment.
A large number of Chinese citizens looking to enter the residential property market in the US are arriving with big budgets seeking higher quality properties in sought after destinations. 40.86% of buyers in 2014 (based on Q1 2014 data) had a budget exceeding AUD $1 million. 24.8% of buyers arrived planning to spend between AUD $650K-1 million, 18.71% with a budget between AUD $215K-650K and only 15.63% buyers only looking to spend less than AUD $215K.
In Australia, because the real estate market is more balanced and pricing levels relatively stable when compared to that of the US and UK, buyers from China are a little more budget savvy with around 70% of buyers arriving with a budget below AUD $1 million. According to Q1 2014 data from Fang.com, 28.77% of buyers had a budget between AUD $650K-$1 million, 28.25% of buyers looking for property between $215-650K AUD and 18.77% of buyers with a budget below AUD $215K. The number of Chinese looking to spend big in Australia is significantly less with only 16.09% looking to spend AUD $1-2 million and 8.14% looking to spend over AUD $2 million.
Many Chinese tend to abide by certain feng shui rules when it comes to buying property as they believe that feng shui accounts for a third of luck. Feng shui rules look at the positioning of the house (if the land is raised slightly to the rear it represents protection), the alignment of the front and back doors (as a direct line from front to back door is said to allow positive energy to enter through the home and escape directly out the back door), the street number of the home and the layout, among many other factors.
Whilst many feng shui factors can be altered, these factors can make or break a sale for the buyers – so it’s important to focus on positive feng shui elements in your marketing collateral and veer away from promoting any negative ones.
The Chinese are very interested in numerology, the significance of numbers. The numbers 6, 8 and 9 are considered lucky in Chinese culture whilst the number 4 is considered terribly unlucky as the Chinese word for 4 sounds like ‘death’. The more the lucky numbers 6, 8 or 9 appear in a house number, floor level or price, the better it is. In fact, a Sydney property was sold to a Chinese buyer for half a million dollars more than the asking price at a selling price of $8.5 million simply because the savvy agent changed the street address of the house from 64 to the luckier number 66.
Chinese buyers, like most Australian buyers, are looking for a safe place to call home for years to come. As owning a residential property in China is almost impossible, the security of a long-term or freehold lease is something many buyers dream of. They want a place of their own where they can raise their family and invest for future generations and that’s exactly what Australia can offer them.
The Chinese are serious about education as it’s one of the most vital factors for a prosperous future for their family. Properties that are in close proximity to well respected high schools or universities are sought after by Chinese. Do your research on local education options and promote them prominently in your pitch to Chinese foreign buyers.
Return on Investment
To maximize the appeal of a property, you need to be able to persuade the buyer of the rental yield on the property if they are investing. They want to know that they will receive a favourable investment return before they commit to purchasing a property.
The Chinese want to be able to appear successful and wealthy to their peers; thus, buying an overseas property in a well-known or favourable location is incredibly attractive. When formulating your pitch, be sure to reference the local landmarks, history or success stories that could help sway their buying decisions.
The Chinese simply cannot live in overseas countries without a visa, so it’s natural that visas are one of the key factors a buyer considers when looking for property overseas. The visa process can be tedious, complicated and confusing; however, you could potentially offer additional services to help your clients and thus persuade them to buy your properties. Try adding an FAQ section or provide potential buyers with a resources kit that helps them set the wheels into motion.
The Chinese are heading overseas because they’re looking for a higher quality lifestyle than they currently have in China. This presents significant opportunities for the real estate market as it allows you to sell the “bonus features” of a property, so to speak. Be sure to stress the value aspect of a property in your pitch by highlighting features that a buyer from China might appreciate. In China, these buyers simply cannot afford a property with a garden, pool, storage, indoor garage or open plan living spaces as the price per square metre in China is much higher than it is abroad.
Not all foreign buyers will choose to live in the property they purchase on a day-to-day basis; however, they will most likely desire to visit it whenever possible with ease. If buyers are flying in from China, they want to know that they can arrive at their new location with ease – so be sure to promote transport links such as direct flights or the proximity to international airports.
Whilst these are some of the factors buyers from China consider, not all buyers are the same. Just as local buyers have different tastes, criteria and perspectives when it comes to viewing and evaluating potential properties, so do international buyers. At Sinorbis, we understand the Chinese market and know how to communicate with the people in a way that works. Contact us today to find out about marketing in China, and how we can connect you with potential buyers.