Hong Kong Property 3

Chinese investors have been turned off foreign real estate by the coronavirus pandemic, a survey conducted last month by brokerage and investment firm CLSA showed.

In 234 Chinese towns, CLSA surveyed 1,600 respondents and noticed that 82 percent had no intention of acquiring overseas property in the next 12 months. Around 57 percent claimed that because of the pandemic, they had less of an opportunity to purchase, compared to just 1 percent who said they felt incentivized.

It appears Covid-19 had quite a negative thoughts on home buyer intentions,” a team headed by Australian real estate analyst James Druce of CLSA recently said in a paper. They said that demand had been hit hard by the pandemic and that recovery was likely to be gradual.

In the next 12 months, just 5 percent of the respondents suggested that they planned to buy an overseas home, CLSA stated.

These results are important since the largest cross-border buying community in the world is made up of Chinese buyers. According to Real Capital Analytics, which monitors transactions worth over US$10 million, they accounted for US$21.7 billion or 5 percent of worldwide real estate investment operation from January to September this year. They contributed 41.7 billion US dollars, about 4 percent of last year’s amount.

According to the poll, 59% of respondents said they would set a $500,000 to $1 million target for buying property abroad, 25% said they would invest less than $500,000 and 15% said they would spend between $1 million and $3 million.

Due to their proximity, the survey showed that Seoul and Singapore were favoured by Chinese investors. Paris, New York and Los Angeles were more common among the major western cities than Sydney, Vancouver and Toronto, which traditionally have become more migrant-friendly.

Chinese buyers have been even more pessimistic regarding purchasing houses in Australia because of the souring ties between Beijing and Canberra. “Certainly, the recent breakdown in relations between Australia and China does not bode well,” said the paper.

Chinese buyers in Hong Kong have also been purchasing fewer properties. CLSA said that just 15 percent of respondents said they would consider buying property in Hong Kong, which ranked fifth among Chinese investor-popular cities.

In the last quarter of 2011, Mainland Chinese buyers accounted for 17 per cent of all primary and secondary flats purchased in Hong Kong. In the second quarter of this year, this figure dropped to 5 per cent. Non-permanent residents have been expected since November 2016 to pay a 30 per cent stamp duty on residential land.

In addition, travel has been restricted due to Covid-19 and “have prevented Chinese in mainland from travelling to Hong Kong and other places to buy property” the study said, adding that after the anti-government protests last year, the city has become a turn off for mainland buyers.

“Demand is expected to come back from mainland Chinese who stay onshore after the lifting of Covid-19 travel restrictions, however it take some time and is not free from possible disruption from local uncertainties,” said CLSA.

Property technology firm Juwai IQI Group, however, said that demand is less specifically influenced by political uncertainties than many expect. They are followed by realistic measures that render it harder for families to buy overseas, then “we may see their demand displaced to third countries”

“In the United States in 2020, it had became more difficult for students to obtain visas, which in turn more students are choosing Canada, the United Kingdom, Australia and also New Zealand as another alternatives. They are looking for a quality, English-language education culture and probably with the opportunity to work in a similar field after graduation.” Ansari said.

He stated that the biggest cross-border purchasing party worldwide was Chinese buyers. In all top destination markets, they were either the largest purchasing community or near to the largest buying group, he said. There are four factors that will enable nations draw Chinese real estate investment after Covid-19 has receded, according to Juwai IQI.

Ansari said, “The countries that are first to open to travel, those that have handled the Covid-19 pandemic well, with a strong property market outlook, strong education institutions background will have significant advantages over other destinations,”

“We believe Thailand, Australia and Japan will be among the most desirable. I think we will be expecting to see an increase in Chinese overseas property investing in 2021 and 2022. Credit is cheap, there is an oversupply of stock, prices have fallen in many cases, and the outlook for price growth is excellent,” he said.

The Centaline Property Agency said Osaka was most preferred by Chinese property buyers. It’s similar to China, and Osaka’s new home rates are reasonably poor,”It is close to China, and prices for new homes in Osaka are relatively low,”

According to the rule, a 250 sq ft studio may be purchased for as low as HK$1.2 million (US$154,784) in Osaka. It will cost HK$4.3 million on Hong Kong Island for a comparable home.