Before heading to Shanghai for the next Prestige MLS business trip, discover why Chinese upper class is spending money on foreign real estate.
China’s real estate prices have boomed between 1999 and 2010, making apartments and houses unreachable for many nationals
China has been grabbing more and more attention from the real estate industry over the passed 20 years. Specialists of the luxury segment are now paying close attention to this growing market. Indeed, the local middle and upper class now represent millions of potential buyers. Such an opportunity cannot be ignored, which is why Prestige MLS will be attending China’s leading annual real estate event, Luxury Property Shanghai 2013 , next December 6-8.
As such, we wanted to give our readers an insight into Chinese buyers profile. The following three key points are to remember when analyzing Chinese demand:
1. Chinese real estate prices are still increasing
China’s real estate prices have boomed between 1999 and 2010, making apartments and houses unreachable for many nationals. For example, in Beijing prices went 258 percent up on average! Shanghai saw a 361 percent increase and prices in Hangzhou soared by 431 percent. More recently, between December 2011 and December 2012, home prices in 70 major Chinese cities rose by 6.4 percent, explained China Daily. This phenomenon makes foreign real estate increasingly more competitive.
2. Government restrictive measures slow down domestic demand
In order to rein in soaring housing prices, the Chinese government has set up a limitation to property purchases, making it impossible for individuals to buy new properties. The Chinese Newspaper explains that new rules ban Beijing families owning two or more apartments and non-Beijing registered families owning one or more apartment from buying more real homes. Besides, the minimum down-payment for second home purchases has been raised by the government from 50 percent to 60 percent of the property’s value.
3. Difficulties to buy luxury properties at home leads Chinese buyers to investing abroad
China is fighting corruption among both civil servants and executives working for private companies. To do so, the government is watching what people own. Should anything be suspicious, the police can investigate. Thus many rich families started investing abroad to avoid issues with authorities.“The rules would definitely limit investment purchases, but would not immediately affect housing prices”, said Wang Xiaoguang, chief director of the Macroeconomic Division of the Institute of Economic Research.
To sum up the condition of Chinese real estate market, we underline that rising prices combined with regulations set up by Chinese government make investments inside China difficult. Official policies definitely foster demand for foreign properties in the Chines upper class.
