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Why Are the Chinese so Obsessed with Buying Property

Jul 24, 2017 | News | 2 comments

In a recent survey conducted by HSBC, mainland China came out well ahead of the US, UK and France in terms of home ownership. Surprisingly, 70% of Chinese millennials are already home owners. This survey also revealed that millennials are quite keen to invest in property as well with an estimated 94% of Chinese eager to purchase or invest in property within the next 5 years.

This focus on property sales helped to drive record-breaking sales in China last year. However, as the demand for real estate continues to grow, the prices in China continue to skyrocket which makes buying property a huge task. Keeping this in mind, it only makes sense for Chinese property investors to start searching further afield for better options and value for money.

As Chinese property investors and real estate buyers continue to gain prominence both in their homeland and abroad, it is interesting to examine what is behind the Chinese home ownership rush.

The Chinese have a great need to update to modernity and have become quite selective in their property quest. They are all looking for modern homes with affable amenities. There are also limited investment channels in China, so those that currently exist are able to monopolize the market.

After the property market was privatized in 1997, real estate became a popular avenue for Chinese investors to cash in on. As there were not many places for the Chinese to store their extra wealth, real estate became what was turned to. China’s phenomenal growth has created so much wealth in China that property now accounts for 70% of China’s household wealth. Also interesting to note that is that China is now the country with the fastest wealth creation in history.

Property a save haven asset?

When it comes to investment, property is considered a safe bet for the Chinese rather than the stock market. The Chinese believe that property prices have only one way to go, and that direction is up. Property will always be something of value to the Chinese as it is something that is tangible. It is a safe and resilient asset.

Mainland Chinese also have strong home ownership aspirations. Even those currently living in rural areas are being helped by authorities to obtain household registration permits. This means that those who are from rural areas but work in the city will now be able to buy property within the city they are working in, allowing the market to continue to expand and grow.

Owning a home is a quality marriage criteria in China

In China, men outnumber women and women therefore believe that men who own homes are of a higher caliber than those who don’t. More than 60% of women in China believe that a house is necessary before tying the knot.

In China, much like the rest of Asia, face culture and social status are constant reminders of reputation and hierarchy. Buying a magnificent home helps to show off wealth and value in front of and amongst family, friends and colleagues. By just owning property, a person’s social status can be elevated as people who own property in China are looked at as more esteemed. Needless to say, owning international property in other countries would further gain face and prestige for them, which could partly explain the Chinese penchant for buying real estate abroad.

Once the Chinese secure a new home in China or abroad, it opens the doors of opportunity to them. The owner has more access to work, education, medical, business and lifestyle opportunities including retirement abroad. However, as the property bubble continues to grow in China, the prices also continue to surge making the dream of owning property unrealistic for many. China is now home to 7 of the 10 least affordable cities in the world for residential property. So with China’s real estate increasingly unaffordable, middle-class Chinese are expanding their horizons by looking for property abroad.

The Chinese believe in generational investments and property is a safe and lasting asset to pass down for generations to come particularly if it’s a legacy home abroad with freehold ownership rights. Also, interestingly, many Chinese are looking to retire to their own homes instead the home of their children in order to lessen the burden on them. These are two factors that greatly motivate Chinese parents to invest in property, especially when they marry.

Huge return of investment in the past years

Taking all of the above into consideration, real estate has delivered huge returns to canny Chinese investors in recent years. Property continues to realize a net value appreciation as prices for homes in China continue to grow.

Beijing is one of the most expensive housing markets in the world, and the Chinese authorities regularly bring in restrictions on domestic real estate. While this cools prices for a short time period, it bottles up demand for property which increases the Chinese looking for property overseas as the grass is always greener on the other side.

Its factors like these that will continue to buoy rampant demand from Chinese investors for property both home and abroad and the potential are staggering. It is estimated that between 2017 and 2020, Chinese property buyers are projected to invest in 4 billion sqm of property in the domestic market alone. With private wealth consistently increasing in China and millennials intending to purchase property within the next 5 years, we expect the Chinese real estate investment to stay strong.

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