BELIEVE it or not, 70 per cent of China’s millennials, aged between 19 and 36 are already proud property owners compared with 46 per cent in Mexico, 41 per cent in France and 26 per cent in the United Arab Emirates.
These findings were revealed by a HSBC survey last year.
The survey showed that 94 per cent of Chinese millennials, also known as Generation Y in mainland China, plan to buy a property in the next five years, compared with 69 per cent in France, 74 per cent in the United Kingdom, and 82 per cent in Canada.’
Juwai.Com, the No. 1 Chinese international real estate website reported 10 factors underpinning Chinese’ passion for property.
1. Growing desire to upgrade to modernity
2. Limited investment channels available in China
3. Investment security
4. Strong homeownership aspirations
5. Essential marriage criteria
6. Face culture and social status
7. Opportunities, opportunities, opportunities
8. Family roots
9. Stellar returns on investments (ROIs)
10. Government restrictions
Malaysia top five in Southeast Asia for Chinese buyers
Juwai.com chief executive officer and director Carrie Law said Southeast Asia has been gaining Chinese buyer market share faster than any other global region since early last year.
She said that the top Southeast Asian countries for Chinese buyers are Malaysia, Thailand, Vietnam, Singapore, and the Philippines.
“Even smaller countries like Cambodia are seeing rapid growth in Chinese buying, although from a much smaller base,” she told NST Property.
According to Law, there were only three Southeast Asian countries (Malaysia, Thailand, Singapore) which made it into the top 15 for Chinese buyers in 2016 and none were in the top five.
Last year, five Southeast Asian countries (Malaysia, Thailand, Singapore, Vietnam and the Philippines) made it into the top 15. Thailand jumped from 6th to 3rd placing, bypassing Canada, the UK and New Zealand.
The key considerations when buying properties overseas include good potential returns, lifestyle change, larger Chinese population, children’s education, safety, Western culture and emigration plan.
“The biggest drivers are the lower prices in these countries and the fact that they seem to have government blessing as ‘One Belt One Road’ (OBOR) initiative countries.
”Capital controls are constraining the amount Chinese buyers can spend, so they have turned to lower priced countries and lower priced property even in high-cost countries like Australia,” said Law.
The UBS Evidence Lab survey revealed in May this year of 3,403 mainland Chinese showing growing interest in Japan and Southeast Asia, specifically Thailand.
Vietnam is also on Chinese buyers’ radar.
While demand in Japan appears to be rising, it’s off a low base and unlikely to have a meaningful impact for some Japan developers.
Buying abroad is largely cash financed and for own use.
In some countries there is concern of settlement risk attached to foreign buyers of residential property bought off the plan where local banks are tightening credit, specifically to foreign buyers.
Interestingly, a lot of Chinese buyers purchasing properties overseas buy in cash, according to the UBS survey.
“Our survey shows tightened capital controls haven’t greatly impacted Chinese consumers’ willingness to buy abroad.
The percentage of Chinese buyers using cash was high at 61 per cent while those using local bank mortgages to finance their purchases abroad was small, at eight per cent. The majority or almost two-thirds of Chinese buyers abroad tend to pay in cash, using their own savings or savings from family/friends.
“Where buyers are using a mortgage, it tends to be from a Chinese bank, either from China or a subsidiary or office in
the foreign market they are buying,” said UBS.
Meanwhile, the survey also showed that 61 per cent of the consumers bought abroad for self-use, but almost two thirds of these buyers use their property on a temporary basis either as holiday destination, business travel, or to visit children studying abroad.
For the one in two consumers who have purchased their offshore property for investment, the large majority of these consumers lease the property to a tenant, and not leave it vacant.
“Our survey shows a notable decline in the proportion of respondents buying abroad for investment and leaving their apartment vacant,” UBS said.
Does foreign stamp duty act as a deterrent?
UBS said with the influx of foreign capital into new-build property in gateway cities, many countries have responded to social and media pressures by introducing a higher upfront cost (stamp duty) for foreign buyers to curb activity.
The UBS survey suggests if the upfront stamp duty was small, say five per cent of the purchase price, it is unlikely to be an effective deterrent for mainland buyers, but higher rates will slow buying activity.
Chinese buyers are sensitive, to some extent, to high upfront costs such as foreign stamp duty but the size matters a lot.
Some countries have introduced foreigner stamp duty as a deterrent to foreign buying of residential property. The total stamp duty for a foreign buyer ranges from three per cent in London (no foreign stamp duty) to 36 per cent in Hong Kong (30 per cent foreign stamp duty).