From investments such as the Marriott Champs-Elysee in Paris, the Waldorf Astoria in New York and Puerto Banus in Marbella, Chinese investors are buying up international real estate, both commercial and residential. Now, they are moving into the Costa del Sol for more investment opportunities.
“The Chinese investor is looking further afield, they’re looking at where the next growth potential will come from,” Andrew Taylor, co-CEO of Juwai.com, an international property website for Chinese buyers, told CNBC.
“Over the past year, Spain has the greatest number of Chinese buyers, followed by Portugal, Italy and Cyprus while Greece fared the worst, due to its financial crisis,” Taylor added.
According to a CBRE report, Chinese outbound real estate investment saw an explosive growth in the past twenty four months, rising from $2 billion in 2009 to in excess of $10 billion USD in total commercial property transactions in 2014.
Juwai estimates show Chinese buyers spent $52 billion USD in outbound residential real estate investments in 2014.
Taylor drew parallels between Chinese outbound real estate investments in Mediterranean countries and the housing boom in China, where the real estate investment demand strengthened in tier one cities before the spreading to the lower tiered cities.
Recent findings from, a Spanish property company, revealed that Chinese investors were increasingly interested in Spanish property because of the “adjustment in prices and good economic prospects.” Spanish property prices are also seeing an upward trend, with property prices in Madrid increasing by 3.3 percent in the second quarter of 2015 year-on-year, and 6.3 percent in Barcelona.
All-property rental income growth in Spain is expected to increase by 21 percent compared to the euro zone average of 13 percent, from 2015 to 2019, said Capital Economics in a Monday note. The increase in property yields comes on expectations that euro zone interest rates will remain near record low levels and the potential for investors to benefit from income growth, Capital Economics said.
While Greece saw a decline in Chinese buyers due to recent political and economic instability, Taylor said that Greece still “represents significant opportunity” to mainland investors as their “dollar can go further” after the estimated 40 to 50 percent tumble in Greek housing prices over the past four years.
According to experts, Chinese property investors can be broken up into groups, including high net worth individuals (HNWI), corporations and institutional investors, that have different motivations to invest in overseas real estate.
“High net worth individuals’ [purpose for real estate investment] is for the younger generation, [with concerns] like education or immigration purposes,” said Henry Chin, head of research for Asia Pacific at CBRE Asia Pacific. He added that institutional investors considered issues such as “diversification, liability-matching and hedging.”
Moreover, Mediterranean countries are a compelling investment for the wealthy Chinese because they “offer incentives which not many other countries do, such as investment immigration,” said Taylor.
So-called golden visa investment programs differ in the minimum required investment amounts across the Mediterranean countries. Greece has the lowest required investment at $279,602 (€250,000), with residence permits renewable every five years. The most expensive among the Mediterranean countries is Spain, which requires a property investment of $559,200 (€500,000) before granting a visa.
The Portuguese Government, which pioneered the property investor visa scheme, has awarded 2,022 such visas since its introduction in 2012, 80 percent of which were granted to Chinese buyers, according to Juwai.com.
A CBRE finding revealed that the top three markets for mainland investors in commercial real estate were the U.K., the U.S. and Australia. Real estate acquisitions in London accounted for an estimated 80 percent in 2013 of China-sourced commercial real estate investment flows to Europe (excluding development sites) to 52 percent in 2014, as the yields in such popular global cities start to compress, said CBRE.
And yet, yields remain attractive in London, with “national employment figures for the U.K. at multi-decade high and forecasts of stable economic growth are expected to support the strong performance of local property markets over the next few years,” CBRE reported.
Taylor adds: “We don’t foresee the [Mediterranean countries] overtaking the U.K. as a top destination anytime soon [but] what we do see is rapidly growing purchasing intent, which will have a significant impact on those local markets.”