Whether you’re looking at New York, London, Sydney or another global city, attracting foreign buyers is always key to the success of a real estate market, experts say. And at present, high-net-worth buyers from mainland China are "essential to the success of the luxury sector," according to broker Dolly Lenz.
"Chinese buyers are generally ready, willing and able," continued Ms. Lenz, founder of Manhattan-based Dolly Lenz Real Estate, "with no need for financing or request for any contingencies."
But while they’re certainly still in demand, ever-tightening restrictions on outbound capital flow from mainland China have some people wondering if Chinese buyers are even attainable anymore.
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This is a topic that’s incredibly timely, said Jamie Mi, an international relationship executive at Melbourne-based real estate agency Kay & Burton, who spoke to Mansion Global from Hong Kong. And the answer is yes, the huge—and growing—number of wealthy people in China are "gettable," she said, but in very specific ways when it comes to how they want to be dealt with, how much they want to spend, what types of properties they want to purchase, and in what timeline.
"There’s no better time to support the Chinese buyers," Ms. Mi continued. "They want to buy. They want to relocate. They want to live a life overseas. And smart agents will go out and get them."
While Chinese buyers didn’t use to care whom they worked with, and would often randomly reach out to brokers via websites like realtor.com or Zillow to test the water themselves, this has totally stopped, Ms. Lenz said.
Instead, now they’re being well referred and keeping all their private information close to the vest. "Trying to make sure someone is qualified, and getting information on who the principals are, what they’re doing and why they’re doing it is very difficult—if not impossible—to track down," Ms. Lenz said. "But if they’re well referred, you take that as a sign that they have the finances to make these purchases."
And Ms. Lenz said that while previously, most Chinese buyers were happy to work with a broker team, and some even preferred to deal with an agent that spoke Chinese, recently, buyers have requested to stick with one consistent—an English speaking representative—and to bring in their own translator to handle all communication for them.
"This is a big change that they want to manage who they’re working with," Ms. Lenz said, "and one that’s very specific to mainland Chinese buyers." It likely boils down to their interest in privacy, she said, and their desire to keep any news of real estate purchases out of earshot from interested parties back home.
When it comes to how much they want to spend, there are a few types of Chinese buyers out there right now.
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At the lower end of the spectrum are buyers who want to spend under $5 million. This type of buyer is common in Australia, where foreigners can only purchase new construction, and have to pay extra stamp duty taxes and fees to do so, said Ken Jacobs, principal at Christie’s International Real Estate Australia.
"This investment is a toe in the water," Mr. Jacobs said, that is likely to lead to a bigger purchase down the road if they show a good return.
When you consider how little you can get in the heart of Shanghai for $5 million—a two-bedroom apartment of about 100 square meters, or 1,000 square feet—this $5 million purchase also looks like a significant value elsewhere, Ms. Mi said. "You can almost buy a mansion in Beverly Hills or a home with a swimming pool in Melbourne for that amount," she said.
The next investment level is between $8 million and $15 million, said Ms. Mi, a high volume, middle price range that’s relatively easy to get out of the country for most luxury buyers.
Ms. Lenz said that this range is where she sees most Chinese buyers who are new to the New York, with many specifically requesting new properties that are under $10 million, and not a dollar more.
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At the high end of the market are Chinese buyers who have already made significant investment in foreign real estate and in some cases, are ready to up the ante, experts say.
In Sydney, Mr. Jacobs said that local Chinese buyers with residency, either because they have a company operating in Australia or for another reason, have purchased the most expensive Australian properties for the past three years, with sales prices between $39 million to $70 million.
In New York, Ms. Lenz noted that within the last year or so, she’s had numerous Chinese buyers who already own multiple units in Midtown buildings request an introduction with the top developers in New York, Los Angeles and Sydney. "They’ve got $300 million to invest," she said, "and are graduating from buying individual units to wanting to invest on the equity side of the deal."
In terms of what Chinese buyers want, it’s simple: New, turn-key properties with big windows and high ceilings in whatever they consider the "best" location, experts say.
But as to their timeline for purchase, there’s some debate. While Ms. Lenz said she typically sees Chinese buyers who are ready to purchase right away, Ms. Mi noted that some buyers who are spending more than $20 million may need more time than they would have in the past to "organically move money out from China, through a relative or other means."
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As a result, settling on a property might take somewhere between six and 12 months instead of the three to four months that was common in the past.
While these general tenets apply to how to "get" Chinese buyers today, experts note that the global luxury real estate ecosystem is always shifting, and currently going through some interesting changes.
In Australia, for instance, Mr. Jacobs said that he’s getting more inquiries from the U.K. after Brexit, from Europeans worried about terrorism, and from Americans concerned about a Trump presidency.
"All of these factors create a little shockwave that increase inquiries," he said, which haven’t all translated to sales yet, but may do so. "There are more and more people looking for a safer and more controlled environment. While geography used to be our enemy because we’re so far away, it’s turned into a positive."
More:Chinese Are Top International Homebuyers in the U.S. — Again
In New York, Ms. Lenz has recently seen an influx of Russian buyers, who like new-to- market Chinese buyers, are savvy negotiators that want new properties for under $10 million.
"Russians were completely out of the market for the last eight-plus years, and now they’re back in droves asking what they can buy," she said—a change that she attributes solely to President Trump, who appears to have a positive relationship with Russia, taking office.
"This is great for developers who need new bodies," Ms. Lenz said, adding: "It will be interesting to see what happens next."
Here’s a look at other news from around the world compiled by Mansion Global:
Transactions Fall As Prices Rise in Southern California’s Property Market
Home prices in Southern California have reached their highest point in nine years, thanks in part to a shortage of supply and an improving job market, according to a new report from CoreLogic. The median home price in the region for December was $470,000 a 1.1% month-over-month increase, while the median price for December in Los Angeles county jumped 4% year-over-year, up to $520,000. In Orange County, the median price rose 5.3% year-over-year to $665,000, while prices in San Diego County rose 4.2%to $495,000. Transactions dropped 2.9% in December compared to the prior year, but CoreLogic analysts say that transactions in the previous year had been artificially high due to new lending regulations, and overall, sales in the region were up 2.1% for the year. (Los Angeles Times)
More:Los Angeles Sees Biggest Drop in Home Sales Since 2008
Hong Kong, Mumbai, and Beijing Top List of the World’s Most Expensive Cities
Four out of the five most expensive real estate markets in the world are located in Asia, according to a new report from Oxford Economics looking at price-to-income ratios in cities around the world. Hong Kong topped the list for the seventh year in a row, with median home prices 18.1 times the median annual pre-tax household income. Mumbai was next in line, as developers struggle to find new building sites in the already-packed city, and where the price-to-monthly income ratio is the "highest among major Indian cities," according to Quartz. The list was rounded out by Beijing, the most expensive housing market in mainland China; Shanghai, where prices rose as much as 40% last year; and London, where prices have been rising at a double-digit pace since 2013. (Forbes)
Dubai Still One of Top Choices for Wealthy International Investors
After a year that brought reports of a sluggish market, Dubai has still landed on a list of top investment destinations for ultra-high-net-worth individuals, or buyers with a net worth of $30 million or more. The Alpha Cities Index ranked 50 destinations worldwide for such investors, putting Dubai at number 36 on the list, with Kuwait at 42 and Abu Dhabi at 50. London topped the list, which sought to rank the overall appeal of these cities for wealthy buyers based on a variety of factors. Dubai’s amenities and infrastructure are thought to be the basis for its enduring appeal. (Gulf News)
More:Dubai’s Real Estate Markets Poised to Rebound in 2017
Firm Predicts Chinese Investment Abroad May See "Big Drop" in 2017
On the heels of a gangbusters 2016 that saw a 53% jump in outbound real estate investment by Chinese purchasers, global property service firm JLL is predicting a drop in such investments for 2017, thanks to new restrictions on foreign purchases enacted by the People’s Bank of China and the State Administration of Foreign Exchange late last year. The so-called "window guidance" rules require a strict review process for foreign real estate purchases over $1 million, and are aimed at slowing capital outflow and easing pressure on the yuan. As a result, JLL head of research Joe Zhou predicts a "big drop" in such investments for 2017, though this will depend on the extent of enforcement. (South China Morning Post)
Australia Prepares for Rush of Real Estate Buyers during Chinese New Year
Of the 26% of Chinese consumers who plan to travel during the upcoming Chinese New Year, 42% of those expect to view properties during their vacation, according to a new survey from real estate site Juwai.com. This effect is particularly strong at the high end of the market, and Juwai chief executive Charles Pittar notes, "It depends on the type of product they’re selling and the location. Generally, we find that the wealthier buyers are more likely to combine property hunting with tourism during Chinese New Year." Among other things, this will mean an influx of prospective buyers into Australia, where new reports from the Foreign Investment Review Board indicate that the value of approvals for foreign investment in the country jumped 75% in 2015, to a total of $61 billion. However, new Chinese government restrictions on foreign purchases are expected to dampen the effect somewhat." (news.com.au)
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Energy Efficient Prefab Homes are Latest Potential Solution for U.K.’s Housing Crunch
As U.K. officials grapple with the country’s widespread housing shortage, both developers and policymakers are eyeing modular homes as an increasingly enticing solution offering affordability, a relatively low carbon footprint, and speedy production. "The housing crisis is about production capacity, and innovation is the most important piece in solving this," said Mark Farmer, author of a much-anticipated, forthcoming government report on housing. While marketers battle consumer distaste over the idea of prefab homes, such projects have already seen success in areas like Manchester, where modular home developer Urban Splash has fully sold its new 43-home project, and is set to increase production to several thousand such units per year. (The Guardian)
U.S. Buyers Eyeing Suburban-style Neighborhoods with City Access for 2017
With cities across the nation are increasingly lacking in affordability, buyers are turning their attentions toward smaller neighborhoods that offer city access with suburban amenities, per Redfin’s new list of "hottest neighborhoods for 2017." Based on site user activity and searches, Redfin found that neighborhoods such as Oakland’s Bushrod in California—a quick BART commute into San Francisco—and Washington’s Woodridge—which offers easy access to nearby Bellevue—dominated searches over more recognizable urban hubs. Suburbs near Glendale, Portland, Sacramento, and Washington D.C. also topped out the list. (Business Insider)