The Beijing Spring Real Estate Fair attracts 105 foreign exhibitors. Wu Changqing / for China Daily

Tightening realty rules at home could prompt investors to buy homes abroad

Tightening real estate curbs in China may prove to be a windfall for overseas companies as more and more Chinese citizens may consider buying property in Europe.

Judging by the response at the recent real estate expo in Beijing, it was clearly evident that the Chinese appetite for foreign real estate is growing.

The Beijing Spring Real Estate Trade Fair, considered a major barometer of the nation's property market, attracted 105 foreign exhibitors from 26 countries and regions this year, including companies from the UK, Spain, Sweden, Bulgaria, Cyprus and Malta. That compares with 76 foreign exhibitors for the same fair in 2009.

Stable market, favorable currency exchange rate, flexible immigration policies and permanent property ownership have all triggered interest in European realty.

"This is the first time that we have presented a London-based building project in Beijing. We see real purchasing potential among wealthy Chinese buyers," says John Morley, sales manager of international project department at Ballymore Group, a real estate developer from the UK.

"After selling realty to rich Indians, Russians and Arabs, we are now doing more businesses with Chinese investors. Nearly 8 percent of our clientele in 2010 was Chinese and most of them put their money in London and South East England properties."

Morley says that his company is now hiring Chinese-speaking solicitors and accountants to help Chinese buyers invest and immigrate to the UK.

Such has been the interest that buyers from Chinese mainland are now one of the biggest spenders in the prime central London property market. They spent an average of 6.5 million pounds (7.3 million euros) on top-end property purchases in the 12 months to the end of February, a recent report from Knight Frank LLP, a leading real estate company, says.

Pedro Soliveres, the director of market planning at Spain's VAPF group, says that the Spanish government is also keen on welcoming Chinese buyers.

"Prices of Spanish properties are similar to the housing prices in China's top-tier cities. House owners in Spain are entitled to permanent property ownership, instead of having just a lien for 70 years," he says.

Soliveres says that Chinese buyers can also gain permanent residency rights and even Spanish citizenship if they stay in Spain for more than seven years. "Realty curbs in China's major cities have stimulated many wealthy Chinese's interest in buying real estate in Europe," he says.

Zhang Qingli, a Beijing resident from Haidian district, is planning to buy a house in Europe. It will be his third investment in the real estate sector. "The policy curbs for the real estate sector have made many investors like me to consider buying property in Europe," he says.

Ba Shusong, deputy director of the Financial Research Institute of the State Council's Development Research Center, says Chinese investors are gung ho on European property as it not only helps diversify their investment, but also opens doors for easier immigration.

"To improve their domestic economic environment and relieve the pressure of high unemployment rate caused by the financial crisis in 2008, many European countries are keen on selling real estate to Chinese investors, as they have considerable purchasing power," Ba says.

The Chinese mainland has 960,000 millionaires with personal wealth of 10 million yuan (1.06 million euros) or more, up 9.7 percent year on year, says GroupM Knowledge, Hurun Wealth Report 2011. Beijing led the way with 10,000 residents boasting wealth of 100 million yuan or more, followed by Guangdong province with 9,000 and Shanghai with 7,800.

With advanced educational, social benefit and health care systems, the EU still remains one of the most favorable immigration destinations in the world for rich Chinese, with most of them living in major cities.

Ba says small countries such as Cyprus and Malta are also looking to China to sell houses this year, as they are EU states and can easily offer EU residence status to foreign investors.

Latchezar Dinev, general manager of Mountain Paradise group, a Bulgarian property development company, however feels that investment in overseas real estate projects may not be a bed of roses. There are several complex factors such as immigration, investment, education and pure real estate projects. People should learn and understand foreign laws on real estate, tax and local council policies.

"However, Chinese buyers are generally very experienced as they have stocked up on similar factors while buying second homes in China," he says.