Chinese purchases of overseas high end real estate heating up

Chinese purchases of overseas high end real estate heating up

Despite the rise of the Chinese economy over the past two decades, the combination of a weakening Chinese stock index (currently at a 14 month low) and forecasts predicting sluggish growth over the next few years (5% GDP by 2016, down from 9.5% last quarter) have left many Chinese investors looking for new places to park their cash.

Chinese investors have been increasingly purchasing real estate overseas as the combination of the global economic recession and the higher RMB value create historically attractive buying opportunities for wealthy Chinese.

Couple this with the upcoming political change next year, and Chinese investors who were once looking for investment returns are now focused on capital preservation — especially if it is outside of China’s borders.

And visa incentives in many countries further sweeten the pot, allowing Chinese investors to gain visas in their country of purchase. The United States currently offers foreign investors the EB-5 Investor Green Card program whereby foreign investors qualify to become a permanent resident of the U.S. if they invest $500,000 or more in a business that creates at least 10 jobs (i.e.: hotels, sports clubs, residential apartment complexes). New legislation is under review that would provide residence visas for purchasers who spend more than US$500,000 on real estate in the US (removing the job creation restriction).

A recent survey by the Bank of China and the Hurun Report, a wealth-monitoring project run out of Shanghai, found that more than half of the 980 millionaires (or more, accurately, those who boast at least 10 million yuan, or $1.6 million, in assets) polled were considering emigrating. Nearly 15% had already done so or had at least begun the process, with the United States listed as their top destination, followed by Canada and Singapore.

One of the key motivations for wealthy Chinese to purchase real estate in the US is to send their kids to US schools. As a result, Chinese real estate purchase tends to “clump” around high quality schools and existing Chinese communities.

In Manhattan for example, sources are citing close to 50% of Manhattan homes in the > US$10 million range are currently being purchased by foreign buyers, the lions share of which are Chinese. In fact, rumor has it that Sandy Weill’s $88 million Manhattan apartment ( was purchased by a Chinese buyer within hours of it being listed on the market. We are guessing the price tag consisting of two of the most auspicious number in Chinese (8) wasn’t an accident!

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