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News Release

Shanghai

Multiple Factors Hastening Offshore Residential Property Investment

Due to changes in the domestic investment situation and tightened housing policies, investors are looking into the offshore residential property markets, with London gaining much attention.


 

Jones Lang LaSalle (NYSE: JLL), the global leader in real estate services, reported in its recent research on offshore residential property investment that due to multiple factors including slowing domestic economic growth, new housing policies and the appreciation of the Chinese Yuan (CNY), Chinese high net worth individuals (HNWI), individuals with personal investible assets exceeding ten million CNY, are increasingly looking into the offshore residential property markets in order to maintain and grow their personal wealth. With more habitable environments, stable investment returns and highly developed service sectors, cities such as London have become hot investment destinations.

In recent years, as outbound capital flow has increased, the attractiveness of diversified offshore investment to HNWIs has increased significantly, causing rapid growth in overseas investment. According to 'China Private Wealth Report, 2013' jointly published by China Merchants Bank and Bain & Company, in 2013, overseas investment is expected to grow 30% y-o-y, similar to the growth seen from 2010-2012. In addition, overseas investment destinations for HNWIs will become diverse, as well as being marked by a greater diversity in investment currencies and asset types.

Among overseas investments, real estate has always been the main investment target for many Chinese HNWIs. Firstly, due to a restriction on home purchases in China and the prolonged weakening of the stock market, the HNWI group looks to alternative investment opportunities in overseas markets. Additionally, the appreciation of the CNY has led to an upsurge in overseas residential property investment, as a stronger yuan makes overseas assets more affordable for increasingly affluent Chinese buyers. Taking the Great Britain Pound (GBP) as an example, the exchange rate from CNY to GBP has increased around 30% compared to 2005, which is equivalent to a 30% discount in price for residential property asset in the United Kingdom. In addition, the education system, high quality and comfortable living conditions, freehold or long-term leasehold residential properties, and wealth protection are also key reasons for the HNWI group to invest in the overseas market.

The most popular offshore residential property investment destinations for Chinese HNWIs include the United States, Canada, Australia, and the United Kingdom, where to future outlook for investment appreciation is very strong. For instance, housing prices in the U.K. have increased 177% over the last 15 years, with London’s growth even more impressive, up 276%. Moreover, while major Chinese cities have 30% ~ 50% down payment and higher loan rates requirements, down payments on offshore residential property can be only 25% and the maximum loan-to-value ratio can reach 75%. With relatively low interest rates, the potential room for future appreciation is considerable.

"From traditional immigration needs, children’s education to the value appreciation of assets, we believe that Chinese investors’ demand for overseas residential property assets will continue to see rapid growth. In future, the proportion of their assets allocated globally will continue to increase. As a global leader in financial and professional services specializing in real estate, Jones Lang LaSalle’s total sales of residential properties in London to Asia Pacific buyers has exceeded GBP 10 billion GBP since 2005," said Michelle Liu, Head of International Residential Shanghai at Jones Lang LaSalle.

London, as the first-choice city for many Chinese residential property investors, has maintained a strong growth momentum and offers many favourable conditions for foreign buyers, making it the best choice for avoiding risk and making a profit. Such advantages include:
• No restriction for foreign buyers to keep or sell their properties.
• Chinese buyers can save nearly 30% due to the appreciated exchange rate between CNY and GBP.
• Foreign buyers do not need to pay Property Tax or Value Added Tax, which maximizes their investment returns.
• Foreign buyers can apply for housing loans, with the lowest interest rate being as low as 3% and the loan coverage ratio as high as 75%.
• Most properties are freehold or long-term leasehold.
• The complete system of legislation and taxation, together with a convenient purchasing procedure, enables easy transactions.

According to Jones Lang LaSalle’s 2012 investor purchaser profile survey results, only 30% of buyers of residential properties in central London are local British, while the remaining 70% are overseas investors and nearly 35% are Asian buyers. Among Asian buyers, approximately 84% are above the age of 40. Investors hail from a wide range of professions, most of which are associated with above average salaries, and 85% of purchasers are seeking investment potential that includes both capital growth and income return.

Michelle says, "Our team has more than 25 years of experience in the international property market. Thus we can provide investment consulting, financial analysis, property purchase, leasing and other comprehensive and professional services for Chinese investors, assisting clients to achieve value and wealth creation."