Last decade it seemed we couldn’t pick up a newspaper without reading a headline that wealthy Russian’s were buying luxury real estate throughout the world with no expense spared. They still may be doing so, but the news headlines these days appears to be now focusing on Chinese property buyers.
Their taste for the international is certainly not minor, but it appears that for relatively pragmatic reasons they are favouring their own back yard: that is, Hong Kong (and Singapore, as we recently featured).
It makes a lot of sense: the self-admistered region is the most popular destination for Chinese tourists, and the common language of Mandarin is no doubt highly important.
Additionally, the rising yuan goes a long way in Hong Kong whose currency is pegged to the U.S. dollar, and with the Chinese government seeking to cool its home property market by introducing limits on multiple-home ownership and higher interest rates, wealthy Chinese property investors are looking to the next best thing.
And they’re spending big, frequently buying the most expensive real estate in town. In fact, buyers from China make up 28% of the transactions for properties that are priced at $12 million HKD ($1.5 million USD) and higher in Hong Kong.
Not wishing to cast a broad brush, but Asian’s love luxury brand association, and this love is clearly evident with Chinese property buyers’ pick of addresses: always the most exclusive, including The Peak and the southern side of Hong Kong Island which are the top choices for those with seemingly bottomless pockets of money.
Neighborhoods with convenient transportation links back to China rank high as well, which is why West Kowloon is prized so highly as it sits above an Airport Express station, and Hung Hom is close to the train terminus that links Hong Kong to Shenzhen and Guangzhou.
The developers of the Imperial Cullinan, a luxury development in West Kowloon, seem to know what Chinese buyers want. The group recently launched a marketing road show in Shenzhen to publicize its four-bedroom condos. Many of the apartments feature sweeping views of Victoria Harbour and two kitchens: one enclosed kitchen with a gas-fired cook top for Chinese cooking and an open Western-style kitchen with an induction stove.
According to Joseph Tsang, managing director of Jones Lang Lasalle, Chinese buyers also value new developments over old, and are looking for capital appreciation rather than rental income.
“These buyers never flip the property and they seldom lease them out,” he says. “They’re not aiming for yield. They’d rather just leave them empty. They just want to park some of their money in Hong Kong.”
Property prices in Hong Kong, fueled by record-low interest rates and the strong demand from China, have reached historic highs, pushing past their previous 1997 peaks. The average price for a house rose 24% last year alone after surging 30% in 2009. Hong Kong’s government has considered several cooling measures in recent months and interest rates are expected to rise later this year, which could bring prices down.
While mainland buyers make up the overwhelming majority of overseas players in the Hong Kong real-estate market, shoppers from other countries are buying as well. Home sales are brisk in Discovery Bay, a small car-free community on Lantau Island that is accessible by ferry and popular among expatriates. According to Christine King, director of the real-estate agency Headland Homes, 90% of them are going to mostly Western expatriates.
During the 1990s and early 2000s, many expatriates, mostly from the U.K. and Australia, were transferred to Hong Kong by their employers and assumed they would spend a maximum of three years in the city before moving home, Ms. King said. But many have chosen to retire in Hong Kong because the taxes are much lower than in their home countries.