China's overseas property explosion has only just begun, and its potential for more or less limitless growth is going to transform the world's residential real estate landscape, says the Chief Operating Officer of China Business Network (CBN)  Dr. Adam Wu. 

 

Leading business cities around the globe are going to go on seeing huge numbers of Chinese state, private and institutional investors trying to and the right location for their huge US$12 trillion-plus mountain of savings. The taps are definitely going to go on flowing.

Chief Operating Officer of CBN -- Dr. Adam Wu

"Oh yes," says Dr. Adam Wu. “We are only at the beginning of what I know is going to be a long-term investment drive out of China. We are a nation of savers. We have a real national savings culture. Everyone knows that there is this massive pot of money out there in mainland China that needs to find a home. It needs somewhere to go, somewhere where it will get a good rate of return.” 
 

Speaking to OPP from his offices in London’s Canary Wharf financial centre, Dr. Adam Wu cannot see any reason why “property in hotspots like London, Vancouver, Singapore and San Francisco” should not stay at the top of the Chinese investor’s shopping list. 
 

"The only problem would be if the Chinese government decided to restrict the way in which people can invest in property abroad, like they have at home,” he says. “But that is unlikely to happen because the government knows that it needs to invest its central reserves and make a good return, and it knows that the people themselves also want somewhere safe to put their own savings.”

 

"We are a country that needs to go out into the world and find good places to invest. We cannot keep all that money at home.”

 

And it is a serious amount of money. “We have the cash,” Dr. Adam Wu tells OPP. “Unlike most of the developed world, China has benefited from the global slowdown. The government needs to find places to invest its US$3.4 trillion central reserves, and private individuals somewhere to get a good return on their US $9.6 trillion savings. All we see here at CBN is more and more demand for investment opportunities in property overseas.”
  

"The market is very large indeed, and getting bigger all the time.”

 

Dr. Adam Wu was first sent overseas at the age of 25 to study. He has a very international outlook, a calm and very affable professional manner and his organisation, CBN, is equally reassuring. It is a professional and independent group that “works to support official Chinese government delegations, as well as investment and business groups travelling overseas to explore new business opportunities.”

 

It has paying subscription members, often in the tourism business, but relies mainly on doing straightforward commercial deals and getting paid on results to survive.

 

His mission, he says, is taking Chinese investors and business people out into the world. And, in residential property terms, he keeps the operation tightly focused on what they want to buy … and where and why.

 

"London is, and will remain, very popular because it is a property market with real liquidity,” Dr. Adam Wu tells OPP. “Chinese investors want to see real capital growth, good profit returns and a clear exit strategy.”

 

And, he adds, “the Chinese like London because there are always people here who are ready to buy when you want to sell.” 
  

Other European capitals like Paris and Berlin are OK, but “too many people like to rent there” says Dr. Adam Wu. 
 

"And lots of our investors go to Canada and the U.S.A., although I am not sure why. I saw some numbers the other day suggesting that about 80% of Chinese investment cash goes into these two North American markets, but that seems far too high.”

 

"If we are not careful Vancouver will have a property bubble again and things will burst, just like they did when the Hong Kong Chinese were investing there in huge numbers in 1997. The market just got out of control.”

 

"Chinese demand for property investments overseas is just too large to stay focused in a few markets worldwide,” he adds. It is better to think about the sort of opportunity being sought, rather than the geography he says. “Chinese buyers come here to the London Docklands, for instance, because they can buy into easy-to-manage, well-built, new, easy-to-rent-out apartments.”

 

With offices in Beijing, Shanghai, Guilin and London, CBN sees its role as guiding property investors through the process of getting into overseas property.

 

"We will go to see the properties for people, we will organise travel packages so that the potential buyers can go and see the property in person, we educate investors online and offline in the various world markets, we get everything together … and we make meetings happen. We see ourselves very much as a partner in the buying process.” 
  

This is an essential, says Wu, as “the Chinese are very cautious. We do not buy things off-plan on a whim. We like to think carefully and only work with partners that we trust. In fact, this is one of the most important characteristics of the Chinese buyer market.”

 

But, once persuaded that the figures stack up, that the property exists, that there is a suitably dynamic secondary market, and that the country in question has stable and well-established freehold property laws, Wu’s clients will spend … often on a big scale. Do your homework, give them the proper facts and figures that they like, and you will make money he says.
 

"The overwhelming majority of Chinese millionaires are into property as one of, if not their main, investment channel. Property is where they have often made most of their wealth. I know investors with at least 800 overseas properties in their portfolio. They will buy very early in the process and flip properties too. And the big ones all like the idea of multi-million dollar trophy properties in the main markets such as the U.K., Canada, the U.S.A and Singapore.”

 

CBN has its own property portal too, called www.soufang168.com, which showcases properties anywhere in the world in the Chinese language. It looks good and is fully optimised for the China Wide Web.

 

China is an exciting place to do overseas property business too, he says. “Money moves fast in China. Sometimes it is like guerrilla warfare. Block us and we go elsewhere in a flash. When the government in China decided to stop nationals from building up big residential portfolios in China, they immediately looked abroad to find better interest rates and bigger opportunities.”

"And this move into overseas property has opened the eyes of some very wealthy people in China. I am seeing more and more of them interested in the idea of emigrating later in life, to live abroad permanently.”

 

Does this mean agencies in China trying to sell overseas properties should tap into lifestyle incentives and offer different add-ons to make the deal go through smoothly?

 

"Mmmmm, yes and no,” says Wu. “If buying the property overseas can get the investor a permanent residency visa, then shout about it. But be careful about over-promoting things like the EB-5 visa in the U.S.A. The scheme is all about setting up a commercial enterprise and investing in a U.S. business, as well as a U.S. home. And businesses can fail and lose a lot of money.”

 

"There are entrepreneur visas and investor visas and all sort of different rules and regulations. These sorts of things can be seen as a bonus, but not necessarily as a real driver of the deal.”

 

"I think that you are, as an agent, likely to get more attention if you are offering things like the Malaysian second home visa or the Turks and Caicos Islands local residency visa alongside the property as a real added-value offering.”

 

"Chinese buyers really like the idea of buying in the Turks and Caicos Islands and, after five years, becoming an overseas citizen of the U.K. They have the money, they are all just looking for somewhere sensible to park it.” So … offer somewhere that will make good money, as well as an escape route out of China.

 

Are there blockages? “It can be hard to borrow money overseas sometimes, if you are a Chinese investor,” says Wu. “Not that this is a problem if you work with us. Many overseas banks find it hard to assess the creditworthiness of a Chinese buyer, and lots of buyers in China don’t even realise that they can borrow abroad, or use their savings as collateral to buy more.”

"But, we have good links with organisations like The Bank of China, or The China Industry and Commerce Bank, and can help. We will act as intermediaries and get finance in place.”
 

"CBN will also help developers find agents and buyers. I can help spread the word, literally and metaphorically. The western developers are all in crisis and don’t have the money for things like a traditional road-show around a lot of big Chinese cities. They can’t afford to travel around a country the size of China. The logistics involved are very hard. And they often don’t speak the Chinese language either. We can use our network to get around these difficulties.”

 

"Developers in China have a different problem. They have money but the government is restricting their opportunities. They are being pushed out of China to find schemes overseas. We have helped a number of them, especially in areas like the Caribbean.”

 

What’s on Wu’s mind at present? The London Olympics he says, quick as a flash, and the boom in Chinese students at universities overseas.

 

"I have helped a lot of Chinese parents find student homes for their children overseas in the past few years,” he says. “I advise them to get a two-bedroom apartment, put their child in one room and get rent out of the other room – enough rent to pay for the running costs of the apartment. Pick the right city, like London, and then sell it on after 5 or 10 years and make a good piece of capital growth.”

 

Any regrets? “I should have bought some apartments of my own in the UK city of Leeds,” he says. “Leeds has two big universities and this summer it will be the training base for the Chinese Olympic team. I could have got in there at the right time and made a good return. But I didn’t.”

 

There will be more opportunities to come though, he adds, smiling. “I’m sure of it.”

The China Business Network 

What does it do?
- Facilitates investment and trade (inward and outward investment)

- Destination management and organising inspection trips
- Travel and tourism management: see www.Lvyou168.cn
- Runs the Sino-overseas Education and Culture Exchange Foundation: see www.Liuxue168.cn
- Facilitates meetings between state-owned enterprises and private investors, and between corporate travel organisers and visitors
- Designs, implements and runs Chinese-language websites on behalf of clients wanting an online presence in China
- Maintains and optimises sites and pages for clients on the China Wide Web 
- Designs and produces all forms of marketing collateral in Chinese

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