Jones Lang LaSalle's International Property

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Tailoring to China buyers

Investment in Italy by mainland firms has created a housing need, writes Peta Tomlinson

PUBLISHED : Wednesday, 27 February, 2013, 12:00am
UPDATED : Wednesday, 27 February, 2013, 5:04am

Chinese and Italians share a tailoring DNA - one renowned for turning out garments to clothe the masses cheaply and at lightning speed, the other for its haute couture. China's needs might seem far removed from the runways of Milan, but fashion is the thread joining these two nations together - and the impact is spreading to property markets.

Tuscany is a case in point. It has been estimated that there are now about 4,000 Chinese-run clothing factories established in Prato, traditional Tuscan stronghold of the Italian textile industry and, as businesses come, they need housing.

Paul Hudson, founder of buying agency Word & Buyer, says: "There have been a number of mergers and acquisitions by Chinese investors in Italian companies and this is sure to continue. By and large, it seems that the Chinese investors are happy to keep the local management in place. However, this interest in Italian companies is bound to have a consequence in the housing market, as the new owners may well now have a reason to buy a second home here - as well as, say, wanting to buy a prestigious villa as company headquarters."

And Italy has put out the welcome mat. Hudson says much is being done to attract Chinese investors into Italy. "We have found, for example, that the Italian Embassy in Beijing is very willing to make the visa process as smooth as possible for Chinese HNWIs [high net worth individuals], one of the first steps in investing in property in Italy, in effect offering to fast-track five-year Schengen visas for this kind of investor. Chinese investors are already being attracted to the historic, luxurious residences that can be found in Italy and I'm absolutely sure that this trend will strengthen and continue."

But, there's more. Hudson says Chinese property buyers associate Italy with style and good living - the dolce vita - and are therefore drawn to its luxury villas and estates.

The Chinese are not alone. A research report by Knight Frank shows that despite Italy's economic challenges, the world's wealthy still consider it to be one of the most desirable second-home hot spots. Italian prime property has performed better than its mainstream counterpart (dropping 20 per cent since the 2008 peak, compared to a

30 per cent fall in the mainstream market), but the higher end is now gaining traction.

As for where they are buying, Knight Frank highlights the Italian lakes, in the north, near Milan, as one of the hot spots for foreign investors. Specifically, its data notes: "The decision by buyers to return to familiar core markets in the wake of the global recession has reaffirmed Lake Como's status as the Italian lake of choice for foreign buyers. Prices have held firm in the last 12 months, due in part to the flight-to-quality trend displayed by buyers - both in terms of location and property type - but also due to its geographical position." Despite its exclusive reputation, says Knight Frank, "apartments with lake views are available from around €300,000 (HK$3.075 million)".

Rupert Fawcett, head of Knight Frank's Italian department, believes Italy by and large has yet to be discovered by Chinese buyers. He says: "From our experience, we have had very little interest from Hong Kong/Chinese buyers in any parts of Italy. There have been a few buyers looking in Tuscany at vineyard opportunities, but I am not aware of any current interest on Lake Como. We have had inquiries and interest from expats in Hong Kong and Singapore, but the main interest for Italy and Como is from the UK, northern Europe [Benelux, Germany, Austria, and Scandinavia] and from Russia.

"I think the Chinese are currently focusing on London, New York and Paris, and we would expect them to widen the search to other parts, including Italy, over the next two-three years." What might draw them? "To Tuscany: ease of access, history and architecture, landscape and climate; to Umbria, Como, Venice and Liguria for similar reasons. The culture, food, wine and lifestyle are also key points. Buyers in Italy are buying predominately for lifestyle reasons rather than commercial," Fawcett says.

Paul Belcher, managing director of Ultissimo, a Lake Como property specialist, sees that market as a bellwether. "From the frightening days of the economic chaos in 2008, and the shockwaves that followed over the ensuing three years, we can measure investor confidence in the number of inquiries we are receiving for property on Lake Como [and the other Italian lakes, although Como remains the most popular]," he says.

"Demand has picked up over the past two years from around the world, including a wide range of locations in Asia. In the past six months we have found homes for our first Indian buyer and our first Hong Kong Chinese buyer, and the supply of really top quality properties remains limited. I look at the number of cranes operating on the lake and we are back to a sound level of economic activity, with a steady flow of new properties coming to the market."

Working with his first Hong Kong buyer - who had been travelling internationally, promoting Chinese business in other countries - "was fun", Belcher says. Having decided that Lake Como is "a wonderful place to have a home to visit three or four times each year", the businessman wanted a deal. "Italians love to talk and make a deal, so there was a surprising cultural fit," Belcher says. "We went back and forth and found the right deal that left both buyer and builder happy."

Moving quickly was the brief, the developer having been "issued with the warning that in Hong Kong there is no night time, only 24-hour activity".

"Our client bought a new apartment which, as is typical, was awaiting a buyer to specify the internal finishes, bathrooms, kitchen and so on. With the internet, the time difference worked well - he decided overnight, Italian time, what he wanted; we were able to sort it with the builder while our client slept. Progress was rapid, our client decisive, and the home was delivered on time," he says.

Belcher "doesn't see any watching and waiting" in this market. Over the past year, "we have begun to receive a small number of Hong Kong and mainland China inquiries, so that the Chinese market, as it grows rapidly and looks internationally, is just beginning to see the sound appeal of Lake Como", he says. So much so that Ultissimo is preparing property information in Chinese.


Buying Guide

What you can buy for €7.75 million (HK$79.44 million)
Villa Le Colonne, a restored, 15th-century villa overlooking Florence. Set over five floors, this historic home of seven bedrooms and seven bathrooms comes complete with fountains, a grotto and an olive grove.

What you can buy for €275,000
The starting price for an apartment in Bellagio Lake Resort, a waterfront development just south of Bellagio on Lake Como. All apartments have lake frontage, views and outside space, and the property includes an infinity pool, beach and jetty.