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Facing domestic restrictions, buyers boost markets abroad
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," says Zhou, a 38-year-old civil engineer, who was visiting the Hong Kong Convention and 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 expanding wealthy and middle classes are finding investment properties and second homes around the world. They are grabbing everything from $68,000 foreclosed condominiums in Florida to $2 million beachfront villas in Vietnam. "Some of them will buy homes considering better education opportunities for their kids, while others look for immigration options," says Mo Tianquan, founder and chairman of Beijing-based SouFun Holdings (SFUN), which runs China's biggest real estate website and organizes buying excursions abroad.
The search for overseas property accelerated in the past seven months as the governments in Hong Kong and Beijing imposed purchasing and financing limits. The measures are starting to cool off a boom that saw prices rise 26 percent in Shanghai last year and 28 percent in Beijing. A favorite destination is London. Britain's weak currency and the allure of its educational institutions 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. "They have been much more of a force after 2009," she says.
In 2008 none of the £82 million ($133 million) in overseas transactions for existing homes in London's Canary Wharf and Docklands areas involved Chinese buyers, according to Savills. Last year, Chinese accounted for 40 percent of the £100 million of property acquired by foreign investors. Residential prices in prime central London rose 2 percent in the first quarter from the previous one.
In North America, moderate weather, good schools, and established Chinese communities are making such cities as Vancouver big draws. 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. Chinese accounted for 9 percent of U.S. home purchases by foreigners in the 12 months ended in March of this year and last, up from 5 percent from the same period in 2009, according to a survey released in May by the National Association of Realtors. That's second to Canadians, who accounted for 23 percent of international sales. Overall, foreign buyers accounted for almost 8 percent of the $1.07 trillion in U.S. housing sales during the 12 months ended in March.
Low-cost homes are the lure in Las Vegas, where prices plunged 58 percent from their 2006 peak, says Betty Chan, who markets herself on her website as "Las Vegas' #1 Chinese Lady Real Estate Broker." "They don't flip," she says. "Chinese like to keep."
In New York, interest among Chinese buyers has picked up noticeably since January, according to Asher Alcobi, president and co-founder of Peter Ashe Real Estate. That's about the same time the government in Beijing issued restrictions on second-home buying in China meant to cool off the domestic market. One of Alcobi's Chinese clients recently closed on two units at Manhattan's Trump SoHo, a condominium hotel where the apartments are rented out as hotel rooms for more than half the year and owners share the revenue. "Chinese love the Trump," Alcobi says. "Anything that has the Trump name is good."
Back at the housing exposition in Hong Kong, David Lau is pitching condominiums in Apopka, Fla., about 15 miles north of Orlando, 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," says Lau, executive director at Singapore-based property agency Roof Real Estate Group. "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."
The bottom line: Facing real estate restrictions at home, some Chinese are buying properties abroad, boosting markets from London to Vancouver.