June 14 (Bloomberg) -- On a sunny Saturday in early June, Larry Zhou strolled the floor of a property exhibition in Hong Kong, wondering whether it was time to buy another home -- not in the city, where residential prices have soared 50 percent in the past two years, but maybe in Thailand or Malaysia.
“My wife and I have been thinking about investing outside of the country since we already own an apartment in Shanghai,” Zhou, a 38-year-old civil engineer, said in an interview at the Hong Kong Convention & Exhibition Centre before wrapping up a business trip and returning home. “I’ve known people in Shanghai who like to bring their money and invest in Hong Kong properties, but I think Hong Kong is way too expensive.”
The two-day event that lured Zhou and 3,000 others is one way that China’s blossoming wealthy and middle classes are finding investment properties and second homes around the world -- exporting a real estate boom that has driven up prices 26 percent in Shanghai last year and 28 percent in Beijing, and bolstering markets around the world. In cities with established Chinese populations, like Sydney, Singapore, and San Francisco, Asians on homebuying tours meet brokers such as Betty Chan, who markets herself on her website as “Las Vegas’ #1 Chinese Lady Real Estate Broker.”
Investors are grabbing everything from $68,000 foreclosed condominiums in Florida to $2 million beachfront villas in Vietnam, a buying spree fueled by China’s surging wealth that mirrors the country’s expanding influence in markets for gold, oil and food. The search for overseas property accelerated in the past seven months as the governments in Hong Kong and Beijing imposed purchasing and financing limits, steps that are starting to cool off domestic markets.
Hong Kong on June 10 intensified its efforts to curb property prices, requiring buyers of homes costing more than HK$6 million ($770,000) to increase up-front payments. For properties of HK$10 million or more, the down payment will be 50 percent.
Banyan Tree Holdings Ltd. sold villas priced from $750,000 to $3 million at an event in March showcasing properties in Bangkok and Phuket in Thailand, Bintan in Indonesia and Lijiang in China, according to Dan Simmons, vice president at the Singapore-based firm’s Banyan Tree Residences & Laguna Property unit.
In Sri Lanka, which was last year named the New York Times’ top travel destination, beachfront land is being acquired by foreign investors who have poured into the country since the end of almost 30 years of civil war in 2009, said Sue Fitzgerald, whose firm, Property Perfect Solutions, is marketing Karooda Properties’ Thona Bay resort on the eastern coast of the Indian Ocean island nation. Hong Kong residents, who account for 70 percent of Fitzgerald’s clients, are buying there in the hope of getting more for their money than they do at home, she said.
Indochina Land’s most recent sale, to a buyer from Hong Kong, was a $2 million villa at its Nam Hai beachside development in the city of Hoi An on Vietnam’s central coast, Piro said. The 3,000-square-meter (32,000-square-foot) property features a 348-square-meter house with three bedrooms and a swimming pool.
For buyers from China, the investing drive shifted into high gear after the government stepped up efforts to prevent real estate bubbles in cities such as Shanghai and Shenzhen.
China lifted the minimum down payment for second-home purchases to 60 percent from 50 percent in January, after 19 straight months of price increases. The government also set interest rates for second-home mortgages at no less than 110 percent of benchmark rates while mandating that those who sell within five years of purchase pay full transaction taxes.
One such place is London, where education, language and Britain’s weak currency have combined to make the capital the leading city in Europe for Chinese residential real estate buyers, according to Yolande Barnes, research director at Savills, the U.K.’s largest publicly traded property broker.
“It’s quite a recent phenomenon,” she said. “They have been much more of a force after 2009, and in common with a lot of overseas buyers, that’s the result of favorable exchange rates.”
In 2008, none of the 82 million pounds of overseas transactions in London’s Canary Wharf and Docklands areas for existing homes involved Chinese buyers, according to London- based Savills. Last year, they accounted for 40 percent of the 100 million pounds of property acquired by foreign investors. Residential prices in prime central London rose 2 percent in the first quarter from the previous three months.
At Barratt Developments Plc, the U.K.’s largest homebuilder by volume, 42 percent of the residential units it sold in London this year through May were to overseas customers, all of whom were Chinese, said Gary Patrick, regional sales director at the London-based company.
For the Chinese, where you buy in London depends on how long you’ve been wealthy, said Barnes of Savills. Second- and third-generation Hong Kong residents gravitate toward prime central London locations like Knightsbridge, Mayfair and Kensington, while the newly rich look in Canary Wharf and the Docklands.
“Investors are looking at a number of markets outside of the U.K., including Germany, Italy, Spain and Turkey, all of which are only six to 12 months away from really flourishing with opportunities,” Murphy said in an e-mail.
In North America, moderate weather, good schools and established Chinese communities are drawing buyers to cities such as Vancouver, which had the third-highest housing costs among English-speaking cities worldwide in 2010, according to Canada’s Frontier Centre for Public Policy. Hong Kong and Sydney were first and second.
Sales of detached homes, townhouses and condominiums in metropolitan Vancouver climbed 32 percent in March from the previous month, and were just below a record for the month of 4,371 transactions set in 2004. The median price of a detached house in greater Vancouver rose 13 percent in 2010 to a record C$774,000 ($792,000) from C$685,000 at the end of 2009, according to the Real Estate Board of Greater Vancouver.
In the U.S., Chinese buyers have helped support home sales and prices in Silicon Valley and Hawaii, while they are an increasing presence in Las Vegas and New York, according to local brokers. They accounted for 9 percent of U.S. home purchases by foreigners in the 12 months ended in March of both 2010 and 2011, up from 5 percent in 2009, according to a survey released in May by the National Association of Realtors, a Chicago-based trade group. That’s second to Canadians, who accounted for 23 percent of international sales.
It’s almost impossible to find two-to-four-unit apartment buildings to buy in Cupertino partly because of high demand from non-U.S. buyers, primarily Chinese, said Jim Carter, a real estate agent at Intero Real Estate Services in Los Altos, California.
The annual limit for Chinese citizens to buy foreign currencies is $50,000, according to China’s State Administration of Foreign Exchange. It’s an obstacle many can get around.
“Most of these buyers are rich and they have their trade companies or rep offices in Hong Kong, Kuala Lumpur or Singapore,” said Larry Hu, a Shanghai-based director of the residential department for Knight Frank LLP. “Those places don’t have currency controls, so they can pay via their companies’ offshore accounts.”[...]
Yamaguchi estimates that about one-third of her firm’s recent residential deals have been all cash, primarily at the two ends of the market -- the most expensive properties and distressed sales.
“I’ve been managing this group of people for over 17 years and we’ve always had a strong Asian demographic, but now it seems even more so,” Yamaguchi said.
Checking new listings the third week of May, she saw a house for sale in near-mint condition located in the Prospect High School district. Meanwhile, about a mile (1.6 kilometers) up the road, a smaller house in worse shape listed for $350,000 more because the owner would qualify for Lynbrook High School, which scores higher on the state academic performance index, she said.
Hawaii is attracting a growing share of China’s emerging millionaires with its golf courses and hotels, as well as luxury vacation homes, said Patricia Choi of Choi International in Honolulu.
“I could tell a marked difference” in client referrals during a three-week trip to China in April, compared with a trip last year, she said.
The Chinese are usually in a hurry when they shop, often buying at least two houses per visit, paying cash because they don’t have time to take out a mortgage, Chan said.
“They don’t mind spending $1 million or $2 million here,” she said. “But they aren’t building. Last year, a group came to start a project. They looked around, did calculations and decided it’s not really worth the effort. Now in China, they can make more money.”
In New York, interest among Chinese buyers has picked up noticeably since January, about the same time the government in Beijing issued new restrictions on second-home buying, according to Asher Alcobi, president and co-founder of Peter Ashe Real Estate, a New York brokerage specializing in luxury properties.
“From a price perspective, New York is actually cheap,” he said. “Hong Kong is 50 percent more expensive than Manhattan on a square-foot basis.”
While Chinese buying has provided a welcomed boost to struggling U.S. cities, there has been a backlash in Australia, long a magnet for Asian immigrants. The federal government introduced rules in April 2010 requiring temporary residents to seek approval to buy existing property and sell when leaving. Buyers living overseas can purchase only newly built housing.
Back at the housing exposition in Hong Kong, David Lau is pitching condominiums in Apopka, Florida, about 15 miles north of Orlando, Florida, that his client acquired during the subprime-mortgage crisis. An 800-square-foot unit is going for $68,000, down from the original price of $129,000.
“The prices we’re selling them at are below cost,” said Lau, executive director at Singapore-based property agency Roof Real Estate Group Pte. “Most of the people who’ve checked out our booth are locals, but we’re also aware of the huge buying power of mainland Chinese buyers. That’s why our next stop is going to be Guangzhou.”