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Homes Away From Home

A glimpse of the most controversial Chinese property purchases overseas

05·27·2016

The growing wealth of China’s middle and upper classes, combined with the restricted avenues for investment within the country, have resulted in a massive outpouring of investment overseas.

As is the case in China, property has been the top choice for most Chinese looking for a safe way to store their money and earn returns. Vancouver, in particular, has been a favored destination for real estate cash, but safe, first-world countries around the world have seen significant interest in property markets from Chinese buyers. Australia and New Zealand, along with select locations in the US and Europe have also seen widespread interest.

It’s not just Chinese buyers of course, Chinese money is just one large part of a worldwide trend toward purchasing property amid rising property prices. But the sheer amount of Chinese cash flowing through property markers has prompted some difficult political and economic situations, to say the least. The following is a compilation of several of the most high profile incidents of Chinese investors purchasing housing overseas.

The student and the Vancouver Mansion

Students are typically assumed to be “doing it rough” when studying, but dorm-life was about as foreign as you can imagine for this Chinese student, Zhou Tianyu, who owns a 99% stake in a Vancouver mansion valued at $24 million USD. The buyers certainly weren’t willing to comment to media, and following their lead, the lawyers who handled the sale stayed as quiet as they could.

It was a startling demonstration of the massive wealth pouring in to the Canadian property market from Chinese buyers, which has gotten so absurd that there is an online reality TV show entitled “Ultra Rich Asian Girls of Vancouver”.

Political effect: Unsurprisingly, it’s a tough issue for the authorities to deal with. Naturally, they don’t want to pop any housing bubble and see homeowners across the country lose huge amounts of money, but on the other hand there is a growing chorus of outrage over housing affordability, or the lack thereof. The situation is complicated by the fact that property is a key driver of the economy.

The Australian heritage building and the angry locals

The Sydney suburb of Toorak is one of Australia’s most famous residential areas. House prices are obscenely high – this is where the rich and influential reside, think of it as Australia’s answer to Beverly Hills, albeit with fewer celebrities. One of its most iconic local properties, Idylwilde, built almost a century ago and regarded as a local piece of history, was purchased by Xiaoyan “Kylie” Bao, the wife of a tycoon and former PLA soldier. After purchasing it for $13.4 million Australian dollars, Bao proceeded to tear it down and put up apartments.

Local residents were incensed, with some reports detailing how residents drove past and colorfully expressed their anger.

It was one of many cases of Chinese buyers purchasing older homes simply to knock them down due to the belief that a brand new house would be better. It didn’t help that Bao was also facing a revolt by members of a golf club she had just acquired, over issues regarding management.

Political effect: The broader issue of Chinese investment in Australian real estate has been similar to the effects in Canada, though much of the public discussion has revolved around agricultural purchases like the failed attempt by a Chinese company to purchase a beef station the size of the US state of Kentucky. In regard to housing, the discussion has revolved around housing affordability for Australians. In terms of Toorak case, the purchase set off wrangling between the local city council and the government of the state of Victoria—the local council wanted the property heritage listed so they could prevent it from being knocked down, but the Victorian government ruled that while the building was of local significance, it did not warrant heritage protection and the buyer could do as they wished—which was knocking it down.

London property becomes haven for global cash reserves

Not only has London become a key hotspot for Chinese and Russian cash, but it’s London’s fanciest neighborhoods that are attracting foreign investment. Reams of headlines have been written on how housing in the city has been priced far out of reach of most locals. One key purchase was by China’s richest man, Wang Jianlin, in one of London’s most famous wealthy enclaves. Wisely, he is avoiding tearing it down, but on top of the 80 million pound purchase, he is planning to spend 50 million pounds on renovations.

Beyond the rarefied area of Kensington Palace, London’s West End area in particular has seen an influx of cash, given its proximity to trendy neighborhoods and easy commute for students studying at nearby university, but this is hardly unique—properties all over the city and even outside the city limits have been subject to the massive wave of interest coming from China.

Political effect: The influx of Chinese money comes after similar waves of foreign investment by Russian and Arab buyers, but with property prices getting further out of reach for average buyers than at any time in recent decades, more attention is being drawn to the issue on this occasion. Authorities have been looking at the property bubble, though have been wary of taking any action that might harm investors or dampen investment enthusiasm. However, the situation in China, particularly in regard to the anti-corruption campaign, could have significant ramifications for London property purchases.

Chinese buyers become bright spot in US housing market

The announcement that Chinese buyers had become the biggest foreign buyers of US property caused consternation from some quarters, though given the doldrums in the US housing market, the fact that Chinese poured $110 billion into the property market was welcomed much more than it has been in other Western economies. Another key element is the fact that in 2012, the US lifted restrictions on foreign companies purchasing US real estate, leading to a wave of interest occurring now from Chinese companies, extending all the way to skyscrapers in Manhattan.

Political effect: Given the amount China commentary that has occurred in a particularly tumultuous election season, it’s surprising that Chinese purchases of US property haven’t been mentioned more, but then again, high house prices aren’t quite the sensitive issue that they are in some other developed economies.

 

Cover image from Shanghaiist

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