WHAT MATTERS THE MOST TO OUR NEW NEIGHBOURS !

6 ways safety influences Chinese when investing abroad

Chinese buyers will put an estimated $220 billion into overseas property by 2025.1

However, while education, emigration, and lifestyle opportunities are driving property sales abroad, Chinese buyers put safety at the top of their agenda when making a purchase.

Safety is a multi-faceted concept for Chinese investors that covers a whole range of factors, so it is vital for agents and businesses targeting Chinese buyers to both understand the nuances of the concept, and also make it a stand-out element of their product offerings.

Here are 6 ways safety greatly influences where Chinese buyers would choose to invest, as well as what they look for when property hunting overseas.

#1 Neighbourhood safety

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Living in a nice neighbourhood, where the streets are safe even at night, is very important for Chinese.

82% of Chinese respondents in a Juwai survey cited a safe neighbourhood as their most important criteria when investing in overseas property.2

This is due to the fact China has fairly good public safety standards – especially Shanghai and Beijing, which is heavily policed – hence for Chinese, particularly for those who are less familiar with a foreign country, many tend to perceive that some overseas countries are comparatively less safe.

In fact, relatively high crime levels overseas3, such as cases of suburban riots seen in London in 2012 are rare. Widespread personal gun ownership – as well as gun violence – in the US4 are also practically unheard of in China, which has some of the most stringent guns laws in the world.

As such, neighbourhood safety is a high priority for Chinese planning to emigrate or for Chinese parents who are sending their children to overseas schools and universities.5

#2 Construction quality

Chinese buyers want houses that last for a lifetime, and not just a decade. Thus, Chinese buyers want to be convinced of the quality of what they are buying abroad because construction practices and standards at home leave a lot to be desired.

Fact is, China built the equivalent of the entire stock of housing in Europe between 1999 and 2009 but not all of that was of quality that could be considered up to par.6

The average lifespan of a Chinese building is 30 years, compared with 132 years in the UK, according to Pan Jiahua, a researcher at the Chinese Academy of Social Sciences, which means that Chinese move often before their houses deteriorate.7

And while the Chinese government has been increasingly strict about work safety and continue striving to improve the quality of China’s development, a fixation for speed and efficiency lingers on in China8, and this has led to many Chinese buyers to continue looking for overseas properties that generally come with better quality assurance.

#3 Food safety high on the menu

An annual China Youth Daily survey earlier this year revealed that 77.3% of its respondents cited food safety as their top concerns.9 Food safety is such a big concern in China that it has even spawned an industry worth $2.7 billion per year10 – imported milk.

A wide-ranging quality scandal in 200811 saw powdered milk imports experiencing a seven-fold increase between 2008 and 2014.12

And although a revised Food Safety Law with harsher punishment recently came into effect on 1 October 20169, it may take a while to rebuild the Chinese public’s confidence in China’s domestic food industry.

It’s no wonder that food safety became the #3 motivation for rich Chinese to emigrate, according to Hurun Report.13 At the same time, the value of food safety is of such importance that it’s one of the reasons justifying the popularity of countries famed for food hygiene – Japan, Australia, and New Zealand – with Chinese investors.

#4 Property rights security

Property rights are a perennial bugbear for Chinese homeowners, and that’s where overseas properties shine in comparison as a safer investment. Freehold ownership terms that are common across the world offer certainty and safety compared to what Chinese buyers are used to at home.

According to US-based think tank Heritage Foundation, China scored a mere 25 out of 100 when it comes to property rights on its 2016 Index of Economic Freedom.14

China’s property rights are so weak that it’s even lower than Uganda and Cambodia, because homeowners in China only get 70-year use rights to their properties while the Chinese government retains formal ownership.

With such limited rights to property and time-bounded usage terms that prevail in China, concerns about the long-term safety of property investments has arisen for Chinese buyers, particularly when it comes to the ability of passing on assets to later generations – a major motivator for Chinese investing overseas as many tend to be generational investors.

That’s why being able to own freehold property overseas holds such massive appeal for all Chinese buyers, and that’s an undeniable fact.

#5 Asset assurance

64% of China’s HNW population consider asset safety as their top consideration when investing overseas15, hence the reason behind the Chinese propensity for portfolio diversification.

China’s property markets are highly cyclical, with four cycles counted alone in the last 10 years. While all real estate markets are cyclical to an extent, property options abroad are comparatively stable, so investing in overseas markets like the US and the UK is equivalent to creating a nest egg protected from volatile markets, and that’s what most Chinese buyers desire.

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#6 Medical standards

China’s ageing population means a massive increase in Chinese demand for quality health services. This is particularly apparent when it comes to wealthier Chinese, many who are increasingly looking for top-notch medical services, which might be hard to find in China’s rapidly expanding cities.

As such, Chinese property investors looking overseas also want the security of access to top-quality medical services, and the freedom of being able to choose the best treatment.

Such sentiments have already built a huge market for overseas healthcare that was worth some $438.6 billion in 2015, and is expected to grow to $678.5 billion by 2017.

It’s also a growing factor that has driven Chinese buyers towards popular destinations that offer world-class medical and healthcare treatments, including the US, Japan, Singapore, Thailand, and the UK.

Agents, listen up

That said, one must remember that venturing into overseas property markets is a big step for Chinese, many of whom haven’t travelled out of the country until relatively recently.

As such, it’s imperative for agents to help and guide them along the way. With this in mind, plus the points above, put your clients at ease by highlighting the security of a freehold lease, the quality of local food and water supplies, the stability of local markets, and the durability of the property you are selling.

With Chinese buyer presence increasingly growing in various markets around the world, competition for business is rising, so it’s detail like this, as well as attention to other major motivators like education options and travel opportunities, that can make the difference.

Sources: 1. Auction.com: Top four reasons Chinese buyers invest in U.S. real estate; 2. Juwai Property Search Survey (March 2016); 3. China Law Blog: China crime by the numbers and by the anecdotes; 4. Daily Bell: Why the Chinese demand US gun control; 5. NY Times: U.S. campuses wrestle with safety perceptions; 6. EIU: Building Rome in a day; 7. China Economic Review: China’s housing sector is crumbling – literally; 8. Global Times: Quality, not speed should be prioritized in development; 9. Chna Daily: Food safety top concern in China; 10. WSJ: Chinese head to the web to buy imported baby formula; 11. Wikipedia: Food safety incidents in China; 12. International Business Times: China and Australia trade: Six Chinese sectors that present opportunities for Australian companies and producers; 13. Hurun Report: Immigration and the Chinese HNWI 2015; 14. Heritage Foundation: Economic Freedom Index; 15. Hurun Report: Immigration and the Chinese HNWI 2016
 
REPORT BY JUWAI NOVEMBER 2016

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