China's real estate investors on a $200B global spending spree – CNBC


Many markets welcome Chinese buyers with investment visas, which grant residency in exchange for capital. These are intended to create jobs and often go toward real estate projects. Over the last decade, more than 400,00 Chinese invested the $500,000 to take advantage of the U.S. program.

Astute developers and agents are providing more Chinese-language material and Mandarin-speaking representatives. Some partner locally. Berkshire Hathaway recently joined forces with, China’s largest international property portal.

Targeting Chinese prospects “is a no-brainer,” Fisher said. “They’ve shown that they have the numbers and the cash to influence markets.”

Beyond language, there are differences between buyers from China and other countries. Chinese corporations use greater equity initially before subsequently putting on debt.

“It’s about securing the building first and then thinking about how to boost the returns,” Green-Morgan said. In contrast, investors from other markets focus more on maintaining specific debt-equity ratios.

Chinese institutions also do more land-developmental deals, which Green-Morgan said is unique. Although some Chinese are searching for headline-generating trophy properties, “most of them are very disciplined in the way they underwrite the deals,” Green-Morgan said.

Retail buyers are generally 100 percent cash buyers. According to Fisher, addresses with “8’s,” an auspicious number, and environments with feng shui have appeal, but these are ancillary considerations. To decrease maintenance and increase tenant interest, they want new properties.

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Buying new also guarantees there aren’t unwelcome spirits, thought to bring bad luck or harm.

Spacious’s Hong Kong property portal has a ghost search option, which highlights tragic events by location – suicide, murder, building collapse. Particularly with older generations, these are worrying. “It affects the demand and price. It’s a material factor in the value of property,” Fisher said.

For younger generations and foreigners unperturbed by these happenings, the app highlights discount opportunities. Fisher cited a rental that had a double murder. The property has experienced delays coming back on the market, was speculated to be at a 40 percent discount to comparables and impacted rental rates for other units in the building.

Recently, buying barriers emerged. To stabilize the yuan, Chinese authorities are constricting capital flight, particularly impacting individuals. Options exist to circumvent these restrictions, legal and otherwise, but Fisher said, “It’s getting harder.”

Not all capital pools are equal, though. Retail and institutional differ. Green-Morgan said state-owned enterprises and sovereign wealth funds are retreating from megadeals, but others are filling demand. Noting that first-quarter 2017 transaction volumes are up year-over-year, Green-Morgan said, “We see no let-up from the institutional investors.”

In 2007 China’s commercial property outflow was less than $1 billion. Now it exceeds $20 billion annually. According to Green-Morgan, individuals and corporations still have an estimated $200 billion to invest abroad.

According to Fisher, Chinese buying overseas is still in the early stages. “This is going to be a long-term trend.”

— Joshua Bateman, special to He can be reached @joshdbateman.

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