Property players look abroad to avoid controls

Sales agents and developers alike are shifting their focus to foreign markets while still targeting wealthy Chinese buyers

PUBLISHED : Wednesday, 22 August, 2012, 12:00am
UPDATED : Wednesday, 22 August, 2012, 9:38am

Shanghai property agent Fang Bei used to earn tens of thousands of yuan a month from commissions she was paid for selling luxury homes to wealthy businessmen.

The money kept rolling in - until the central government introduced a series of policy measures aimed at curbing demand and price growth in the mainland's overheated property market.

The measures had an instant effect on Fang's sales record and income, and so since they were introduced two years ago she has shifted her attention to marketing overseas properties to wealthy Chinese investors.

Now, she says, it takes longer to make a sale, and her income has fallen, but she still manages to make a good living.

"As the measures forbade people to buy more than two homes, my income plunged by about two-thirds," she said. "But after shifting to sell overseas properties, I'm getting about half of what I used to earn."

To keep herself updated with developments in offshore property markets, Fang visited an exhibition of offshore properties held in Shanghai last year and realised this presented her with an opportunity she had ignored in her 10-year career as a property agent.

In the exhibition hall were booths offering properties for sale in Britain, Australia, the United States, Vietnam and even the Cayman Islands. The hall was packed with eager home-seekers and investors while sales activity in the domestic market languished.

Most exhibitors offered free immigration consultancy services and help with the formalities of applying for residency status in their home markets.

The visit was a wake-up call, the 30-year-old Fang said. It was time to make the shift to marketing overseas properties on the argument that, unlike China, offshore markets were free from the heavy hand of regulators.

Where Chinese estate agents such as Fang have gone, the nation's major developers have followed.

Shanghai-based Greenland Group, ranked among major Fortune 500 companies, has recently said it will speed up its overseas property investment with a plan to build a residential-commercial-hotel integrated project in Sydney at an investment cost of 8 billion yuan (HK$9.78 billion).

"The project will cater to mainland buyers and those who have children studying in Sydney," Wang Xiaodong, a spokesman for the group, told the South China Morning Post.

Greenland is also on the lookout for an opportunity to acquire hotel properties in Frankfurt in Germany, and Madrid in Spain. "We plan to buy existing hotels and will manage them ourselves - they will be targeted at mainland Chinese tourists travelling in the two cities," he said.

Earlier this year, Greenland said it planned to develop a "health care city" on Cheju, a resort island at the southern tip of South Korea, at an investment cost of 900 million yuan. The project will comprise 2,000 units, 70 per cent of which will cater for Chinese buyers.

Buyers of the project can apply for residency status in South Korea.

Last month, a Suzhou developer, Zan Wei Realty, debuted its luxury Suzhou development, Chuo Cheng Villas, in Hong Kong. Its biggest unit measures 43,040 square feet and comes with a 6,000 sq ft private garden. It went for a whopping 500 million yuan.

More such moves offshore by major mainland developers could be expected, said Frank Chen, executive director and head of research for China at property consultancy CB Richard Ellis.

"We have seen a number of developers signalling an interest in expanding overseas, and in most cases they have indicated that the key reason for expansion into these markets is due to an increasing number of overseas Chinese who are their key target clients," Chen said.

"Most cases of expansion are opportunistic rather than an apparent new strategy."

Mainland Chinese buyers account for 20 to 40 per cent of overseas investors in Vancouver, Toronto, London and Singapore, with most buying for either investment or immigration purposes, consultancy Colliers International says.

"Previously, we saw some developers sell the best units to local buyers. But now they are launching first in Asia instead of at home," said Lina Wong, managing director for east and southwest China investment services at Colliers' Shanghai office.

Meanwhile, Beijing's vow to maintain its curbs on the housing market has started driving an increasing number of Chinese developers to build or market housing projects abroad.

"Giving impetus to their overseas expansion is the equally increasing number of mainlanders who wish to avoid the central government's stringent restriction on the purchase of a third home even if they have ample funds to invest in properties," an analyst said.

Developers investing in properties overseas include Dalian Wanda and Hong Kong-listed Country Garden Holdings.

Country Garden is developing properties in Serendah and Semenyih in Selangor state on the west coast of Malaysia, with joint venture partner Malaysia Land.

It plans to launch the developments to mainland Chinese buyers next May.

"Malaysian Chinese and mainland Chinese will be the major buyers," Mo Bin, chief executive of Country Garden, was quoted as saying in a Mizuho Securities report.

Lee Wee Liat, head of property research at BNP Paribas Securities (Asia), said many of these developers were planning for what would be a larger strategy in eight to 10 years' time.

"By that time, the urbanisation trend in China will be more or less done, and the way for developers to grow their business will be to look into new areas of growth outside China," he said.