14 things you definitely didn’t know About Chinese investment in Australian Property
While the Australian property market has its ups and downs, one thing has remained certain over the last decade: Chinese property investors LOVE Australian property. The Chinese market is a huge part of the Australian economy, and an important contributor to the growth of the market.
If you’re a developer, or thinking of selling your property to a Chinese investor, here are 14 things you definitely didn’t know about Chinese investors.
Important facts about Chinese investors
1. Chinese Investment in overseas property grew from US $600 million in 2009 to $33 billion in 2016
Chinese investors love buying property offshore, and the numbers really speak for themselves. In just 8 years, the total overseas investment grew from US $600 million in 2009 to $33 billion in 2016. From trade wars to pandemics, there have certainly been ebbs and flows in growth in recent years, but the impact Chinese investors have on the market cannot be denied.
Especially when those investment figures are predicted to reach a staggering $220 billion by 2025. This is despite China’s attempts to stem the flow of capital outside of the country.
While many Australian property developers and vendors often raise concerns about the Chinese Government’s rules around getting money out of China, the truth is that these are simply restrictions, not blanket bans.
2. You can’t own property in China
One of the biggest reasons Chinese Investors look overseas to buy property is that you can’t actually own a property in China. China does not allow for complete ownership of a property, instead it is a leasehold system where you can only buy the rights to use the property for a certain amount of time (usually 70 years). So when it comes to protecting generational wealth, overseas properties are seen as strong stable investments that can be held for their children, grandchildren and beyond.
3. The #1 reason Chinese investors buy Australian property is to diversify their wealth
It’s not just recent issues, like Coronavirus and the US-China Trade War. Despite years of news stories of crazy growth, the Chinese economy has often fluctuated and is not seen as stable by many residents who want to diversify and protect their wealth. The solution for many Chinese investors is to invest offshore, in various industries, to protect from fluctuations, economic slowdowns (especially if there are production issues in China) and hedge their bets.
4. 70% of Millennials in China own a property
There are loads of reasons Chinese love buying property. It’s not just about investment, but owning a property gives you status, helps show face and make a strong impression, and is almost essential marriage criteria. That’s right, owning a property gives you much better prospects of finding a life partner! On top of that, the barriers to entry are lower among Chinese, as the cultural norm in Chinese families is that your parents and grandparents will help you buy your first home, and in return you will care for them as they age. That’s why 70% of millennials in China own properties. Can you imagine?!
5. Australia is seen as a financial safe haven
The Australian economy is seen as strong and stable, without major fluctuations or risks. Not only is Australia seen as a great place to park your money, it’s also a great place to live. Australia’s clear blue skies, clean air, sunshine, beaches, high quality education, proximity to China, and the bang for your buck when buying a home in Australia compared to a home in China make it a really attractive option for Chinese property investors.
6. More than ¼ of Chinese tourists are shopping for property investments
1.2 million Chinese tourists visit Australia each year, and a whopping 27% say they are shopping for property on their holidays. China’s Golden Week in October is one of the most popular times to visit as the majority of the country have a whole week off. Many Chinese visitors come to see their family in China, and take the opportunity to check out properties they may be interested in buying.
7. Chinese investors can only buy new property
In Australia, offshore investors are only allowed to buy new homes. This typically means homes in a development, often off-the-plan, newly completed but not yet sold or house and land. However, it’s important not to forget about the huge market of new migrants coming to Australia who can buy any type of property. 27,852 permanent migrants per year come in from China, and they don’t bring a house with them!
8. Students are allowed to buy property
Foreign investment restrictions state that temporary residents can buy a home in Australia, with no restrictions. Which, when combined with the fact that many parents support the younger generation into their first home, is why Chinese students are big buyers of properties.
9. Education is another big driver of Investment
There are over 2 million Chinese students in Australia in 2019. Not only are there a limited number of University spots in China relative to the population, but the Australian education system is seen as very high quality. Among High Net Worth Individuals, giving their students a high quality, international education at an English speaking University is a top priority.
10. Chinese investors often have significant offshore portfolios
One of the myths we hear often is Chinese investors can’t get their money out of China. However, many High Net Worth Individuals (HWNIs) from China already have extraordinary offshore investment portfolios. Meaning there’s no need to have to get money out of China. Just look at the Significant Investor Visa. Every year, the Australian Government gives out 7,000 visas related to financial investment, and 100-200 of those are part of the Significant Investor Visa program, where $5 million must be invested in Australia. 87% of those visas have gone to Chinese Nationals.
And for the not-so-super-rich? The Chinese government allows US $50,000 per year to be moved out of the country, and while there are many documented cases of sneaky methods to exceed this limit, we consistently hear from agents that property purchases are often from multiple friends or family members combining money together to make the investment.
11. The most popular price point is $400,000-$600,000
While there is a perception that Chinese property investors in Australia are all super wealthy HNWIs buying mega mansions on Sydney Harbour, the truth is most Chinese investors are looking for a home that will provide great capital growth, high rental yields, or be easy to divest when required. And a $26 million harbourside mansion is very hard to sell, turns out. In reality, the sweet spot for Chinese investment is actually a mere $400-600k. Which makes sense when you realise most new homes are apartments or house and land packages in new developments.
12. Chinese investors trust their agents and advisors
When it comes to making the leap and purchasing overseas, it’s only natural that anyone would want a reliable partner on the ground to help with the decision. However, in Chinese culture it’s all about your network, building trust over years with your business partner, and taking solid recommendations from that partner. That’s why agents and advisors are SO important in China and why directly advertising to or putting the hard sell on Chinese Investors won’t usually yield a result. To learn more about Chinese business Culture, friend of WeTools David Thomas explains it really well in this interview, where he talks about the concept of Three Cups of Tea.
13. Chinese investors can’t see your website
It’s very well known that the Chinese Government has strict censorship controls in place, but many people don’t realise that these rules are so intense that much of the Internet outside of China is actually blocked. Known as the Great Firewall of China, the Government has a range of policies and actual technical solutions that either completely block, or slow down to the point of essentially being blocked, most foreign websites. This means that even if you translate your website, Chinese Investors probably can’t actually see it. This makes it really hard to market to the Chinese audience, or provide essential information for Chinese investors to choose your home or project.
And it’s not just investors this affects, even those residents who have permanently migrated to Australia (especially the millennials) struggle as they can’t send your website back to their parents at home who are helping them invest.
14. WeChat is the #1 platform Chinese investors use to get information
There are over 1.15 billion monthly active users of Chinese social media platform WeChat, which makes it China’s #1 social media app. But WeChat is much more than that, it’s a collection of apps much like the iOs system in an iPhone. China’s adoption of mobile phone technology has seen a huge change in online behaviour, to the point where most internet browsing is done almost exclusively on the mobile phone, and increasingly through WeChat. WeChat allows companies to host websites, share news articles, manage customer service interactions, take payment and more. So being on WeChat is actually preferable to having a website in China.
Chat to us about the benefits of using WeChat
If you’re looking for Chinese investors to buy your properties, then the best way to reach them is via WeChat, where you can share key investment information, chat directly to buyers, and build long term relationships through great social content to make your property attractive to Chinese investors. Using agents is crucial to a successful, scalable China strategy for developers, and we consistently see agents asking for WeChat content to share to their buyers to seal the deal.
If you’d like to know more about using WeChat to market to property investors, please get in touch with our agency, or read more about our WeChat tools and features specifically built for developers here.