Individual overseas property investment is divided into investment-oriented and bottom-fishing types.
According to incomplete statistics from the China Overseas Investment Union, the scale of overseas property investment grew from 1.86 billion USD in 2011 to 2012, an increase of 46%, equivalent to 2 billion RMB. This refers to direct property purchases, excluding immigration. In 2013, it reached 5 billion USD, and it is projected that the scale of future investments by Chinese investors will exceed 1 trillion RMB.
According to incomplete statistics from the China Overseas Investment Union, the scale of overseas property investment grew from 1.86 billion USD in 2011 to 2012, an increase of 46%, equivalent to 2 billion RMB. This refers to direct property purchases, excluding immigration. In 2013, it reached 5 billion USD, and it is projected that the scale of future investments by Chinese investors will exceed 1 trillion RMB.
The motivations of Chinese clients are twofold: investment-oriented clients and bottom-fishing clients. Bottom-fishing clients aim to profit from price differences in the future or for rental income. While rental yields in China are 1%—2%, many places in Europe can generally achieve 3%—6%, and many cities in Spain can achieve rental yields of 4%—5%.
Another factor is asset allocation. This is similar to the Wenzhou property buying groups that were purchasing properties everywhere years ago, but the difference now is that Chinese property buying groups are going abroad for asset allocation.
Major Real Estate Developers Are Expanding Overseas
According to a report by the Financial Times, on August 30, 2011, Beijing Zhongkun Investment Group spent 100 million USD to purchase 300 square kilometers of undeveloped land in northeastern Iceland to build an eco-tourism resort and golf course. This caused quite a stir, especially at a time when the domestic property market was in a state of anxiety. Some viewpoints suggested that Zhongkun's move signaled that the trend of capital being squeezed out of the property market and into overseas land acquisition had emerged.
From a financing perspective, large Chinese real estate enterprises also have a need to go global. Foreign financing costs are very low, with interest rates in many countries generally under 2%, which is completely different from China. Looking at real estate enterprises that have expanded abroad, dozens of companies including Country Garden, Vanke, Wanda, Greenland, and Vantone have acquired land overseas, and some projects have already been delivered.
First is the industry leader Vanke. In February 2013, Vanke and Tishman Speyer of the United States confirmed a partnership for a top-tier luxury high-rise apartment project; Tishman Speyer is considered the equivalent of Vanke in China. In addition, Vanke has also signed agreements with a Singaporean company for joint property development in both locations.
Greenland was among the earlier entrants, with projects in Germany, Thailand, Sydney, and South Korea, which entered the harvest period in 2013. Furthermore, it is reported that Country Garden has invested in 5 projects in Malaysia, with an initial estimate exceeding 10 billion RMB. Wanda has entered the North Caucasus and Mumbai, India, while Beijing Capital Land has established a China-France Economic and Trade Cooperation Zone in France. Vantone's project in New York is called the China Center, and China Overseas Land & Investment has purchased an office building in London as part of its expansion efforts.