Most Chinese investors, the largest buyer group globally, won't buy overseas property in next 12 months because of Covid-19: CLSA survey

Sandy Li
·5-min read

The survey found that Chinese investors preferred Seoul (above) and Singapore because of their proximity. Photo: Bloomberg

SINGAPORE (EDGEPROP) - The coronavirus pandemic has put Chinese buyers off international real estate, a survey conducted last month by brokerage and investment group CLSA has found.

CLSA polled 1,600 respondents in 234 Chinese cities and found that 82 per cent had no intention of buying overseas property in the next 12 months. About 57 per cent said they felt less of an incentive to buy because of the pandemic, compared to just 1 per cent that said they felt incentivised.

"It appears Covid-19 had quite a negative impact on buyer intentions," a team led by CLSA's Australia property analyst James Druce said in a report recently. They said the pandemic had hit demand hard and that recovery was expected to be slow.

Only 5 per cent of the respondents indicated they intended to purchase an overseas property in the next 12 months, CLSA said.

These findings are significant because Chinese buyers constitute the largest cross-border buyer group in the world. They accounted for US$21.7 billion or 5 per cent of global real estate investment activity from January to September this year, according to Real Capital Analytics, which tracks deals worth more than US$10 million. They contributed US$41.7 billion or 4 per cent of the total last year.

According to the survey, 59 per cent of respondents said they would set a budget of US$500,000 to US$1 million for purchasing property abroad, 25 per cent would aim to spend less than US$500,000 and 15 per cent said they would spend between US$1 million and US$3 million.

The survey found that Seoul and Singapore were preferred by Chinese investors, because of their proximity. Among major western cities, Paris, New York and Los Angeles were more popular than Sydney, Vancouver and Toronto, which have historically been more migrant-friendly.

Souring relations between Beijing and Canberra have made Chinese investors much more pessimistic about buying houses in Australia. "Certainly, the recent breakdown in relations between Australia and China does not bode well," the report said.

Chinese buyers were also buying fewer homes in Hong Kong. CLSA said only 15 per cent of the respondents indicated that they would consider purchasing property in Hong Kong, which ranked fifth among cities popular with Chinese investors.

Mainland Chinese buyers accounted for 17 per cent of all primary and secondary flats bought in Hong Kong in the last quarter of 2011. This number fell to 5 per cent in the second quarter of this year. Non permanent residents have been required to pay a 30 per cent stamp duty on residential property since November 2016.

Moreover, Covid-19 travel restrictions "have prevented mainland Chinese from travelling to Hong Kong and buying property", the report said, adding that the city had become less popular among mainland buyers since the anti-government protests last year.

"We do expect demand to come back from mainland Chinese who live onshore after the lifting of travel restrictions, but it should take time and is not free from possible disruption from local uncertainties," CLSA said.

Property technology company Juwai IQI Group, however, said political tensions affect demand less directly than many believe. If they are accompanied by practical steps that make it difficult for families to purchase overseas, then "we may see their demand displaced to third countries", said Kashif Ansari, the company's co-founder and chief executive.

"In the United States in 2020, it became more difficult for students to obtain visas, which helps explain why more students are choosing Canada, the United Kingdom, Australia and also New Zealand. They are looking for a quality, English-language education and perhaps the opportunity to work in a stimulating field after graduation. They have more options than just the US," Ansari said.

He said that Chinese buyers were the largest cross-border buying group globally. They were also the largest buying group or close to the largest buying group in all top destination markets, he added. According to Juwai IQI, there are four conditions that will help countries attract Chinese real estate investment after Covid-19 has receded.

Read more: Mainland Chinese investors are selling Hong Kong property after China reports first GDP contraction in four decades

"The countries that are first to open to travel, those that have handled the coronavirus well, those that have a strong property market outlook, and those that attract Chinese residents and students will all have significant advantages over other destinations," Ansari said.

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

Osaka was most favoured by Chinese property buyers, Centaline Property Agency said. "It is close to China, and prices for new homes in Osaka are relatively low," said Terence Law, senior principle project director at Centaline's China and overseas property division.

A 250 sq ft studio can be bought for as low as HK$1.2 million (US$154,784) in Osaka, according to Law. A similar property would cost HK$4.3 million on Hong Kong Island.

The flats in Osaka fit with most investors' budget, Law said.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2020 South China Morning Post Publishers Ltd. All rights reserved.

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