Why are Chinese real estate buyers looking for opportunities abroad?

China will soon be investing more money abroad than it receives. In 2014 the Chinese real estate buyers invested an estimated $130billion in a range of different industries, including UK real estate (source: The Diplomat). Compared to the $3billion annual investment made in 2005 (source: China Business Review), China has clearly taken a huge step forwards in terms of overseas asset purchase.

In just ten years China has become one of the most influential investors in the world. What is driving the change?

Loosening of government restrictions

The Chinese government has been tightly controlling the movement of money out of the country for many years. Currently individuals are allowed to exchange no more than $50,000 per year into foreign currency, and can only make overseas investments through licensed investment funds. With the movement of capital restricted, many wealthy Chinese have turned to overseas real estate investment as a safe place to put their money (source: Bloomberg Business).

Decline in home property market

China’s economy has been slowing down recently, with many experts blaming the declining property market. By April 2015 property prices had fallen 6.1% on the previous year across 70 Chinese cities (source: CNBC). An overinvestment in property has created huge amounts of debt and an overhang of stock (source: Business Insider). Although house prices have risen this month, the current state of the market does not make it an attractive proposition for wealthy Chinese real estate buyers looking for low-risk opportunities.

Strategic real estate investment brings residency opportunities

Wealthy Chinese aren’t just putting their money into UK property in order to make a profit or keep it safe. Some need the property itself in order to help with their future plans. Not only can properties in London, or other parts of the UK, serve as a good base for dealings in Britain or across Europe, investing in the country can also be the first step towards gaining dual citizenship; something that makes it much easier to travel and invest in a foreign country. The UK allows foreign investors with more than £10million of their money held in the country to apply for citizenship after two years (source: The Guardian).

Access to better education and prospects

China’s high pressure education system involves a lot of testing and many parents are worried that it is detrimental to their children. Wealthy Chinese parents are recognising the importance of a well-rounded education – one that allows pupils to explore and discover. Moving abroad, where better education systems can improve the future prospects of their children, is the top reason to emigrate for 78% of the wealthy Chinese thinking of leaving the country (source: Bloomberg Business).

Several other factors are behind the wealthy’s desire to leave their home country. China is still suffering from overpopulation and pollution in its main cities. Many Chinese see real estate investment in London’s leafy suburbs and the UK’s quiet cities as the gateway to discovering a new quality of life.

(Image source: Image created by Stuart Miles | www.freedigitalphotos.net)