China second largest property buyer in us
Photo credit: Fifth World Art
China has increasingly become a major force in global real estate markets, as buyers and investors look overseas for places to put their money. Indeed, the percentage of those who have either left the country already or intend to do so climbed to 64 per cent last year.
Why are they leaving? The Annual Report on Chinese International Migration 2014 by the Center for China and Globalization and the Social Sciences Academic Press (published by China Daily) reveals that 41.51 per cent - the overwhelming majority - are moving abroad to find better living conditions.
Indeed, China is becoming a country known for its smog as much as its investment in property. The concentration of one of the most threatening pollutants, nitrogen dioxide, recently reached 231.8 micrograms per cubic metre in Central Hong Kong, according to the South China Morning Post, "a level of concentration the World Health Organisation deems toxic". At the same time, the mainland is reportedly suffering its most severe air pollution levels in 52 years.
The wealthier investors are looking for financial security, suggests Bain & Co, as uncertain economic prospects at home drive funds overseas. Indeed, 30 per cent of overseas investment by high net worth individuals from China goes into real estate.
Where are they going? The International Migration report shows that Australia and Canada are top of their wish list. It is no coincidence that both rank highly on the The Economist Intelligence Unit's list of most liveable cities, with Vancouver and Melbourne frequently topping the league tables: smog there is an alien concept.
A growing number are moving to Europe, the report reveals. Indeed, the continent has been waving the flag for non-EU buyers repeatedly in the past year, as countries such as Spain, Cyprus and Portugal offer residency in exchange for much-valued investment in their struggling property markets.
Marc Pritchard, Sales and Marketing Director of housebuilder Taylor Wimpey España predicts "an even bigger increase throughout 2014" from non-EU investors, "with the potential of newly affluent Asian buyers following [Russians and buyers from the Middle East] as their wealth swells and the Chinese government steps up a three-year campaign to cool home prices."
The US, though, is where the majority of Chinese buyers end up. Indeed, the Center for China and Globalization and the Social Sciences Academic Press notes that as of 2011, China is the second-largest overseas property buyer in America, as investors enjoy the combination of improved quality of life and fairer financial prospects for their properties.
Detroit's recovering market is one such target for Chinese buyers, as property prices rebound from a low base. Global Investments Incorporated sold more properties in Detroit than any other overseas company.
During this time, they found that the Chinese market played a significant part in theses sales figures. Indeed, the investors were not only Chinese residents but also Chinese investors from other parts of the Globe.
John Arthur O'Donoghue, Operations Director of Global Investments Incorporated, tells TheMoveChannel.com: "The main interests of these buyers is high yielding low value properties which are often bought in multiples in States like Detroit Michigan, Ohio and upstate New York. They are also investing in large scale downtown projects which is helping push Detroit back into the running.
"In 2014, we have seen this trend continuing with an even higher demand and sales volume from Chinese investors. This is impacting on the current stock level and is therefore pushing prices upwards. Global investments Incorporated believe if you are going to purchase in Detroit at these low prices, 2014 is the year to do it."
Rebecca Smith, Investment Director at OVG Invest, has also seen strong interest from mainland China and Hong Kong for the past five years.
"This is mainly because Chinese investors tend to view property in the USA as a safe bet due to the low prices and high returns currently available," she says. "Many are also concerned about rumblings of a property price bubble in their homeland and are eager to move some of their wealth abroad."
Broadly speaking, she explains, there are three types of property in the USA which interest Chinese investors: trophy properties in cities such as New York and Los Angeles, properties which will provide accommodation for their children while they are studying in the States, or properties offering high rental returns;
"Over the past 12 months, however, there has been a significant rise in the number of institutional investors buying up large commercial buildings," she comments. "In fact, in the last year businesses based on the Chinese mainland invested over US$ 1 billion in the Detroit metropolitan area alone.
"What’s more, in October 2013 a Chinese consortium out-bid local entrepreneur and billionaire Dan Gilbert on two of Downtown Detroit's most prestigious buildings. The Free Press and David Stott buildings were bought, sight unseen, by Shanghai based Dongdu International Group. The company paid US$ 13,600,000 in total and plans to spend US$ 50,000,000 re-developing the Free Press Building. It will become a mixed use business, residential and retail complex."
"The bottom line," she concludes, "is Chinese investors are very interested in any location in the USA where they can make secure investments which return big profits."