Why Chinese property buyers are going mad for the Mediterranean nations
Adrian Bishop
Other
The push by Chinese real estate buyers into the United States, Australia and the UK is well established, but now it seems as if they are increasingly targeting Mediterranean nations as well.
Demand for property in Spain, Italy, Portugal, Greece and Cyprus on the leading Chinese website Juwai.com has risen dramatically over the last year. The index for Cyprus has climbed the highest, by 451%, although, admittedly, from a low starting point.
Even so, the smallest gain among the five countries has still seen Portugal property demand rise 227% year-on-year and all of the five countries have outperformed the European Union average.
OPP.Today asked Simon Henry, co-CEO of Juwai.com, why interest has grown so much in Cypriot real estate. “Cyprus is starting to get past its troubling legacy of bank failure and title transfer scandal. Buyers are noticing again what they liked about the island in the first place, which is the affordable luxury homes and the lifestyle. I don’t want to overstate the case, Cyprus has rapid growth in part because it is starting from a very low base, but it is growing.
“What surprised us about the Mediterranean is that it’s growing so much faster than the European Union as a whole. We knew Chinese buyers were seeking out property in these countries, but we didn’t realize until we ran the data that the growth was as rapid as it is. It shows that lifestyle and environment remain major motivators of some categories of Chinese international property buyers.”
The figures point to demand continuing to grow over the next five years, Mr Henry believes. “This trend points to growth in future property transactions by Chinese buyers, which will benefit these hard-hit economies.
“There are always quarterly variations in demand, but by 2020 we expect Chinese transactions in these countries to have grown significantly in number and total value.”
The ‘Golden Visa’ property-for-residency schemes operating in Spain, Portugal, Cyprus and Greece have differing degrees of success, Mr Henry points out.
“The importance of Golden Visas to high-net-worth buyers varies by the country. It has higher take up in Spain and Portugal, which is perhaps because these countries offer a more attractive package overall. For some buyers, it is very important to have the opportunity to not just invest in property but to establish the option of permanent residency in a Mediterranean country.
“Greece’s investment visa isn’t pulling buyers, but Portugal’s is. Italy is attracting more buyers despite having no investment visa,” the Juwai.com Purchasing Intent Index: Mediterranean Countries – Quarter 2 2015 report points out.
The combined Juwai.com Purchasing Intent Index for the European Union rose by more than 50%, which is a strong gain, but is relatively paltry relative to the performance of the Mediterranean countries.
“What are the primary reasons for this demand growth in Europe’s Mediterranean countries? An extended period of weak property prices in the region has combined with the growing wealth of Chinese buyers to create more opportunities for Chinese real estate purchase than in the past.
Chinese buyers are becoming more comfortable in international markets, and looking beyond the destinations that have traditionally been most popular.
“Attractive lifestyles, affordable luxury property pricing and competitive investor visa programs have added to the appeal. Property marketers have promoted the programs aggressively, implying that citizenship and a European Union passport will be relatively easy to obtain.”
Common factors that bring Chinese buyers to the Mediterranean countries include lifestyle issues in China, the desire to diversify investments and seek greater returns and the search for international educational opportunities for their children.
Here is a country-by-country breakdown of Chinese property demand:
Cyprus
Chinese interest in Cyprus starts from a particularly low base, given the island’s small size and the difficulties that investors have face due to the banking crisis, the title deeds scandal and allegations of overpricing.
However, the Juwai.com Purchasing Intent Index for Cyprus has increased furthest in relative terms of all the countries discussed in this report. It is up 102% over the prior quarter and 351% year-on-year.
The average price of Chinese property hunters in Cyprus was $815,166 in the second quarter of 2015, down 3% from the prior quarter’s average price of $837,687 and 1% down on the value of $826,998 a year earlier.
The two top destinations for Chinese buyers in Cyprus are Paphos and Limassol. Paphos in 2011 was the first Cypriot location to see large-scale Chinese purchasing.
Greece
Of the five countries covered in the report, Greece is among those with the least Chinese buyer interest in absolute terms; nevertheless, interest is increasing at a rapid rate.
The Juwai.com Purchasing Intent Index is up 87% in the last quarter and 218% year-on-year to overtake Portugal, but lower than those of Spain, Italy and Cyprus.
At $1,094,933, the average price paid by Chinese buyers is up 3% from a year earlier and down about the same from the prior quarter. The top Greek destination for Chinese residential property buyers is Athens.
Greece’s investment visa does not seem to be driving much demand, with the country’s overall economic and financial situation undermining its attractiveness.
Italy
Italy has seen rapidly increasing Chinese purchasing intent over the past year, with the Juwai index rising 223% over the prior year and 43% over the most recent quarter.
At $893,926, the average price is just up 4% over the prior quarter, but more significantly it is down 19% from the $1,102,876 of a year earlier. “This suggests the country is attracting an increasingly diverse group of investors, in addition to the primarily well-heeled second-home buyers of a year ago,” says the report.
The top three destinations are Milan, Rome and Venice. According to the United Nations, Italy has the largest Chinese-born population of any of the countries discussed in this report. Unlike Spain, Portugal, Greece and Cyprus, Italy does not offer an investment visa programme.
Portugal
In Portugal, the Juwai.com Chinese Residential Purchasing Intent Index is down 16% from its peak in the prior quarter, but still 127% higher than a year ago.
At $1,829,506, the average price is 6% higher than the prior quarter, but it is 59%higher than the $1,150,194 of a year earlier. “The average price for the past three quarters has been significantly higher than previously, suggesting that high-net-worth buyers are increasingly dominating the buyer mix.”
The higher average price in part reflects the impact of Portugal’s investment visa, which attracts many buyers to the country. The investment visa is forecast to bring in an aggregate of US$2.19billion by the end of 2015 and four out of five of the investment visas issued have gone to Chinese nationals, says Juwai.com.
The top destinations for Chinese buyers in Portugal are Lisbon, the nearby prime suburb of Cascais and the Algarve municipality of Faro, in the country’s south.
Spain
Spain’s Juwai.com Chinese Residential Purchasing Intent Index has the second fastest growth. This is even more significant given that Spain also attracts the greatest number of Chinese buyers in absolute terms, of all the countries discussed here.
The Purchasing Intent Index is up 88% quarter-on-quarter and 292% over a year earlier.
At $1,035,189, the average price is 26% up quarter-on-quarter from $819,440. A year earlier, it was 9% lower, at $948,840.
Over the past year, Barcelona has been by far the most popular destination for Chinese property seekers, followed by regional capital Valencia, national capital Madrid and the southern beach resort of Marbella. However, in the second quarter of 2015, for the first time, Valencia displaced Barcelona as the most popular destination for Chinese likely buyers.
Spain’s investment visa also drives Chinese interest in real estate and the scheme captured US$768million in new investment in its first 15 months.
The Chinese population in Spain has more than tripled in the past decade, to 181,701 in 2013, from 51,228 in 2003.
The Juwai.com Purchasing Intent Index measures changes in Chinese buyer interest by tracking their online property hunting activity on Juwai.com over time.
© OPP Ventures 2014