What Does The Future Hold for Chinese Property Investment?

By MCR Homes • November 30, 2017 • News
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Overseas investment from China in residential, commercial and industrial property totalled $33bn in 2016, up 53 per cent from a year earlier, according to global real estate group JLL, as Chinese buyers snapped up office buildings, hotels and residential land. (FT, 2017) 

Wealthy Chinese and Far Eastern investors like the stability, democracy and solid land titles that Britain offers, as well as feeling that owning property here carries kudos and offers a prime opportunity to educate their children in the English-speaking world. They are also keen to store some of their riches outside of their homeland.

[/vc_column_text][/vc_column][/vc_row][vc_row full_width="stretch_row_content"][vc_column width="1/2"][vc_column_text css=".vc_custom_1511437963164{padding-left: 30px !important;}"]

Northern Economy Boost

[/vc_column_text][vc_column_text css=".vc_custom_1511439955793{padding-left: 30px !important;}"]Almost exactly two years since President Xi Jinping visited the North and announced the UK’s first direct flight to China outside of London, research released early in November revealed that the connection is delivering a significant economic reward, or ‘China Dividend’, to the northern economy. Statistics from economic consultancy Steer Davies Gleeve show that since the Hainan Airlines route between Beijing and Manchester was launched last year, UK export values from the Northern Hub have soared 265 per cent to £200m a month. In its first year, the airline has carried 90,000 passengers between the two countries. Meanwhile, inquiries from China to Manchester property and investment agents have doubled - with the ‘potential’ to create 850 new jobs in the city region. Visitor spend as a result of the link has been valued at £140m, double the expected value, and there are now 40 per cent more people in the North now travelling to China than prior to commencement of the route Passenger volumes have come in at 15 per cent higher than predicted and the inward investment pipeline has doubled in 12 months, with international student numbers growing at twice the national rate. Already worth hundreds of millions of pounds a year to the North, this “China Dividend” is predicted by researchers to grow substantially in the years ahead as the profile of the region increases further in Asia and as civic and business ties between the North and China are strengthened further. The report, called The China Dividend: One Year On, is being launched as a Ministerial delegation from the UK Government heads to Shanghai to promote trade and investment opportunities in the Northern Powerhouse.[/vc_column_text][/vc_column][vc_column width="1/2"][vc_single_image image="3341" img_size="large" alignment="right" css=".vc_custom_1511439149029{padding-top: 90px !important;}"][/vc_column][/vc_row][vc_row full_width="stretch_row_content"][vc_column width="1/2"][vc_column_text css=".vc_custom_1511438298650{padding-left: 30px !important;}"]

Strict Regulations In Place

[/vc_column_text][vc_column_text css=".vc_custom_1511440011956{padding-left: 30px !important;}"]The Chinese passion for owning property is so strong that by the end of 2016, rampant demand from Chinese buyers drove a stunning increase in China’s housing prices, with hotspots like Shenzhen and Beijing seeing pricing increases of 23.5% and 25.9% y-o-y. (Juwai, 2017) However, over 20 city governments in China have imposed stricter restrictions on top of the existing property rulings in a bid to rein in property price growth in their own country and to dampen fears over a weakening yuan currency. However, with the yuan staging a sharp turnaround in recent months and with outflows dwindling, authorities have shown no signs of easing their campaign. First-time buyers will now have to put down much more to secure a property in China. Minimum required down payments in Beijing have now been raised to 30% from 20%, while buyers looking to acquire a second home face even tougher rules – minimum down payments increased to 60% from 50%, and even higher to 80% from 70% for high-end properties. (Juwai, 2017) With a narrower range of domestic choices, especially when compared with more attractive overseas market alternatives, as well as the opportunity to invest abroad whether for a new life overseas, educational reasons or retirement, it’s clear that the drivers are in place for a solid increase in demand from Chinese buyers for overseas property. In fact, Juwai.com saw a 6.7% y-o-y increase in overall Chinese buyer enquiries for international property in March 2017.[/vc_column_text][/vc_column][vc_column width="1/2"][vc_single_image image="3278" img_size="large" alignment="right" css=".vc_custom_1511438738672{padding-top: 90px !important;background-position: 0 0 !important;background-repeat: no-repeat !important;}"][/vc_column][/vc_row][vc_row full_width="stretch_row_content"][vc_column width="1/2"][vc_column_text css=".vc_custom_1511438309441{padding-left: 30px !important;}"]

The Future

[/vc_column_text][vc_column_text css=".vc_custom_1511440202244{padding-left: 30px !important;}"]As appealing the UK housing market is to chinese investors, it too comes with it’s own pitfalls and obstacles. Chinese government allows China’s citizens to exchange up to $50,000 worth of Yuan into foreign currencies each year. This means that for chinese buyers seeking to invest in high-end off plan developments; typically commanding a 30-50% deposit in the UK to secure new build property, isn’t an option for many years due to restrictions enforced by the Chinese government. For example the average price of a 2-bedroom apartment in Manchester is around £200,000, with a 50% deposit this would mean it would take a chinese investor over 3 years to exchange currency and transfer money to the UK just to secure the funds for the deposit. However, MCR Homes is different in that our distinctive investment process requires only a minimum 10% deposit upon exchange. Referring back to the investment example previously mentioned, this means a deposit for a £200,000 property could be secured within one year including enough funds to cover any other costs. Should an investor be interested in taking a MCR Homes property off the market, all that is required is a £1,000 reservation fee. Once the reservation has been made and the property is taken off the market, the process of exchanging contracts will begin; at which time a 10% deposit is taken for developments with a build period of 12 months and under.[/vc_column_text][/vc_column][vc_column width="1/2"][vc_single_image image="3280" img_size="large" alignment="right" css=".vc_custom_1511438760989{padding-top: 90px !important;background-position: 0 0 !important;background-repeat: no-repeat !important;}"][/vc_column][/vc_row]

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