Homebuyers driven overseas
Beijing's tighter restrictions on home buying, aimed at curbing rapidly increasing housing prices, have pushed wealthy mainland investors to shift their focus offshore to Hong Kong and Macau and even as far away as Canada, the United States, Mexico and Britain.
International property consultants said the sale of overseas properties to mainlanders had increased since the beginning of the year, as have inquiries, and they expect the trend to continue.
'It appears that the increased interest in offshore purchases is being fuelled by the continued speculation that the China market is poised for a correction along with the new property regulations imposed earlier this year by the Chinese government,' said Patrick ONeill, chief executive of ONEILL Group, a United States-based firm that specialises in international residential and commercial real estate.
'As an example of the increase, in the last 30 days two offers have been received from Chinese buyers for units at Trump SOHO development in New York City,' ONeill said.
Trump SOHO is a condominium residence in Manhattan with prices starting at HK$8.1 million.
As a percentage of total foreign purchases in the US, Chinese buyers doubled to 10 per cent last year from 5 per cent in 2009, according to the National Association of Realtors. For properties valued at more than US$1 million, this figure is probably closer to 15 per cent, ONeill said.
'I suspect that these figures will increase dramatically for 2011,' he said. 'The only other countries with higher percentages are Mexico and Canada.'
James Macdonald, head of Savills China Research, said mainland investors were looking at different investment opportunities now that the residential sales market was slowing and the restrictions in place on multiple property purchases.
He said a number of buyers have indicated that these factors may have played a role in their decision to look at investing overseas.
'We have also seen an increase in the number of 'walk-in' clients at a number of our other international offices,' Macdonald said.
In an effort to curb inflation and rising home prices, Beijing has tightened mortgage requirements, raised interest rates and limited the number of home purchases.
As a result, mainland home sales fell an average of 25 per cent while home prices rose 0.4 per cent last month from the month earlier, according to SouFun Holdings, owner of the country's biggest real estate website.
'Chinese investors are becoming increasingly active on the global investment stage,' said Knight Frank, the international property consultant.
According to property agent Robert Chen in Vancouver, most buyers in Vancouver West, Richmond and White Rock early this year were newcomers to Vancouver or buyers from the mainland.
Buying interest is also growing in Macau and Hong Kong.
Wilson Chung, marketing director of One Oasis in Macau's south Cotai district, said mainlanders accounted for 10 per cent of the buyers when the company launched the first phase for sale in March last year. This year, the number rose to 20 per cent of buyers.
Mainlanders who hold Macau residency through investments are not included.
Ben Hong, a mainlander and a decade-long Macau investment resident, bought a 1,200 square foot unit in One Oasis last month for HK$5.8 million. 'Buying properties in China has become complicated,' Hong said.
Mainlanders are also showing interest in new launches in Hong Kong.
Kerry Properties sold about 200 units over the May 7 weekend at Lions Rise, its five-block residential development in Wong Tai Sin. Of these, 60 flats, or 30 per cent, were sold to mainland buyers. Cheung Kong (Holdings) also said mainlanders were interested in its Uptown project in Yuen Long. In view of the market potential, international property agents are increasingly organising overseas property exhibitions in Hong Kong and the mainland to attract buyers.
One US-based property agent in February opened its first office in Hong Kong to tap capital from affluent mainlanders.
'We don't have our eye on the [Hong Kong] market. We are targeting wealthy mainlanders who are eyeing the US market,' said Kenny Lo, general manager of Intero HK, a unit of US-based Intero Real Estate.
Lo said interest from mainlanders had grown this year. 'I started helping Hong Kong and mainland Chinese buy properties in the US in January 2010, before our new office was set up,' he said. 'At the time, mainlanders showed interest, but now they are ready to act.'
Lo said his clients have flown to Manhattan and San Francisco to visit properties and many deals were near to closing.
British developer FreshStart Living has teamed up with SouFun to attract Chinese investment to the market in the northwest of England. Macdonald said there has been an increase in road shows in Hong Kong to three or four in a weekend, up from one or two about 18 months ago.
Many of these road shows involve prime London properties. 'Of those attending and viewing properties at the Hong Kong road shows approximately 20-30 per cent are mainland Chinese,' Macdonald said.
While there has been an increase in demand for international properties by mainland buyers, they account for only a small percentage of the global market.
'Our research in Britain indicates that in 2010, mainland Chinese buyers accounted for just 0.6 per cent of London prime purchasers, up from 0.2 per cent in 2009, while Hong Kong accounted for 1.1 per cent of London prime purchasers,' said Macdonald.
Thomas Lam, research head of Knight Frank's Greater China division, said some mainlanders are buying for pure investment, but many are purchasing in order to meet citizenship criteria. A large number also were looking to buy in the cities where their children are studying overseas, he said.
Austerity measures announced this year:
Down payments raised to 60 per cent of the price for buyers of a second home, with the interest rate on their mortgage at 1.1 times the standard rate
Trial run of a property tax approved Chongqing and Shanghai
Buying limit of no more than two homes set by 35 cities
Property price control targets announced in more than 600 cities
From May 1, developers release open price lists for all flats
Interest rates raised twice by central bank since January. One-year deposit rate raised to 3.25 per cent while five-or-more-year lending rate stands at 6.8 per cent
Sources: Samsung Securities, DTZ