The Chinese appetite for foreign property investment has shown no real signs of abating despite changes in factors which may have resulted in a slowdown of investment.
That is the key theme from the latest Investorist China 2017 International Property Outlook report, which is the result of in-depth interviews with 120 real estate agencies across China who collectively will sell almost 11,000 foreign properties in 2017.
Australia currently holds the number one position for Chinese investors though the USA is expected to overtake this year.
Jon Ellis, Investorist chief executive said, “Chinese outbound property investment appears to have been an unstoppable juggernaut to date. It has survived domestic currency controls imposed by the Chinese government and a range of shocks in international buying markets, from Brexit through to a nationalist Trump administration and a raft of taxation and banking restrictions in Australia.”
Chinese investors showed undiminished interest in foreign property throughout 2016 and the first quarter of 2017. They were attracted by favourable conditions in gateway cities around the world and driven by their continued strong motivation for diversifying wealth into assets outside of China.
Significant changes to the property landscape affecting Chinese investors have occurred over the past 12 months in each of China’s key buy markets.
In Australia this includes a raft of increased taxes and duties and greater bank lending restrictions dampening demand by up to 30% in the latter half of 2016 and early 2017, although demand has largely bounced back.
In the US, there was much speculation in the lead up to the Presidential election in November 2016 about the implications for domestic property prices and foreign investment. Uncertainty about potential capital requirement increases for the EB-5 Immigrant Investor Program in 2017 led to a flurry of applications from China to be processed before changes were announced.
In the UK, the shock Brexit result in June 2016 and the immediate devaluation of the Pound (31 year low, with more than 13% drop in value) represented an immediate gain for Chinese investors looking to purchase property in either CNY or USD. A-grade property in London Zones 1–2 previously considered unaffordable, looked more attractive and offered greater yields as a result of the Pound’s decline.
Overall, sentiment from Chinese agents was very positive about buying opportunities for the next 12 months.
The report covers the sentiment of Chinese buyers, current and anticipated demand, key purchase drivers, top buy countries and cities, funding requirements, properties types, loan availability impact, currency outflow restrictions, yields, budgets and ‘sweet spot’ price ranges.
- 88% of agents predict sales volume of overseas properties will increase or remain unchanged in 2017. 70% predict an increase, 18% expected demand will remain the same, only 12% predicted a decrease
- Australia currently holds #1 position for Chinese investors (69% of respondents, USA the second most popular at 59%), but appeal of US property growing fast and is expected to overtake Australia in 2017
- Chinese property investors generally have strict selection criteria: the top three considerations for investors were budget (64%), followed by location (63%), then investment return rate (58%)
- Children’s education is the top incentive for overseas investment (76%), followed by migration purposes (69%) and asset safety and capital gain (68%)
- 82% of Chinese investors have enough funds to complete property purchases, and potentially dont require loans (although loans still sought for financial leverage, currency restrictions and other reasons)
- For those investors who do require funding, 43% of agents said this affects their clients’ buying decisions and 31% said this affected settlement of their properties
- 44% of those surveyed said their client’s budgets were between AU$582k and $970k (3-5 million RMB/Yuan)
- The pricing ‘Sweet Spot’ in Australia is $400,000 – $800,000 for Chinese investors
- Asked which property type clients prefer, apartments were still the top choice (64%), followed by single homes/house and land packages (55%), townhouses (38%) and land (33%)
- Melbourne, Sydney and Brisbane account for around 90% of all off the plan purchases, with the Gold Coast, Adelaide and Perth representing much smaller markets.