With residential prices in Hong Kong up 50% in the past two years, making it the world’s most expensive place to buy an apartment, China’s (NYSE:FXI) wealthy and middle classes are looking for property investment opportunities elsewhere. So far, these investors have driven up real estate prices 26% in Shanghai and 28% in Beijing in just a year. But with governments in Hong Kong and Beijing putting limits on purchasing and financing in efforts to curb increasing prices, thus limiting returns on investments, domestic markets have begun to cool down while investors look for properties abroad, and oftentimes right here in the U.S. — properties they hope will offer greater returns on smaller investments.
With Chinese (NYSE:FXI) investors buying villas priced from $750,000 to $3 million in Vietnam, beachfront property in Sri Lanka, and London flats, they’re putting money into housing markets across the globe. London is currently the most popular European city for Chinese residential real estate buyers because of the combination of its quality educational programs (many Chinese families send their children to the U.K. for college), the language, and their weak currency, which has lost about a fifth of its value against the Hong Kong dollar since the peak of the U.K.’s housing market in 2007. In 2010, Chinese investors accounted for 40% of property being acquired by foreign investors in London’s Canary Wharf and Docklands areas, and helped push up residential prices 2%.
Investors haven’t stopped at London, but are looking at markets in Germany (NYSE:EWG), Italy (NYSE:EWI), Spain (NYSE:EWP), and Turkey, with Istanbul being especially promising with a strong economic outlook and growing tourism industry. And in North America, the combination of already established Chinese communities and good schools have been drawing buyers to cities like Vancouver (NYSE:EWC), where housing prices are the third highest of all cities in the English-speaking world, pushed up 13% in 2010.
Chinese buyers have accounted for 9% of home purchases made in the U.S. by foreigners in the last 12 months. Among the most popular locations in the U.S. are Silicon Valley, Hawaii, Las Vegas, and New York. Sales of single-family houses in Cupertino, CA, where Apple (NASDAQ:AAPL) is based, rose 21% in a year, while prices also rose in Palo Alto, Mountain View, Sunnyvale, Atherton, San Carlos, and Los Gatos.
Not only have Chinese (NYSE:FXI) investors been buying up two ends of the market — the most expensive properties and the most distressed — but they’ve been paying in one-time lump sums of cash. In California, Chinese buyers are usually attracted to better school districts, willing to pay a high price tag for a small home if it grants them access. The case is different in Hawaii, though, where buyers are attracted to golf courses and luxury vacation homes. In Las Vegas, Chinese investors are buying up cheaper properties after prices have plummeted 58% since 2006. And in New York, it’s not uncommon for Chinese investors to come in and easily spend $1 to $2 million in cash; Manhattan property is cheap compared to Hong Kong standards.
And we can expect to see sales in the U.S. continue to rise as the Chinese are not only pushed out of domestic markets, but Australia (NYSE:EWA) as well after the country put limits on foreign property sales.