The challenges Chinese Buyers Overcome when Investing Abroad
Some recent research was conducted by Juwai into the buying trends of Chinese investors. We are all aware that the Chinese see Thailand as having huge potential in terms of investment so the findings make interesting reading. It appears that 73% of Chinese buyers spend less than six months researching property, whilst a further 11% purchased a property in month 6-11. To put it simply, Chinese investors move quickly with many looking to make an investment in Thailand.
Foreign exchange rules have been tightened in China but this hasn’t stopped Chinese investors actively looking to invest abroad. The research conducted by Juwai also suggests that these Chinese investors will be spending more time conducting research in future. It is therefore important to fully understand the challenges that are experienced by Chinese buyers when they are looking to invest in property in places such as Thailand. The research identified three areas that caused investors the biggest concerns.
1. The Legal System
Many Chinese buyers are only aware of the rules when it comes to purchasing property in mainland China. When they come to countries such as Thailand they are welcomed by a whole range of new challenges from taxation to conveyance, not to mention visas and residency. When you throw in the various fees, rules regarding foreign ownership, the transfer of money from abroad and other legal checks, the confusion just grows.
It is easy to appreciate why first-time buyers may find the whole prospect just too daunting to continue. However, having an international advisor such as Emerging Trend Advisors (ETA) can make the process fair easier to comprehend, taking away much of the stress and confusion. An experienced advisor who can speak the native tongue can help a Chinese citizen looking to make an investment in Thailand.
2.Finding the right property for them
Another major challenge faced by Chinese investors is regarding finding the right property. Many Chinese find that international agents and brokers don’t really understand them, and what they are looking for in terms of their investment. The survey found that too many investors had been presented with properties well beyond their budgets and attributed this to agents having been exposed to news headlines regarding Chinese investors purchasing mansions and penthouses.
Like with many other nationalities, the needs of the individual should be met first and foremost rather than prior judgements due to an individual’s passport. In Thailand, the trend with Chinese buyers has been mid-range properties providing rental yields of between 5% and 9% p.a. and these investments are made in various locations around the country.
3. Financing the purchase
A challenge that is uniquely Chinese rears its head when it comes to financing purchases. The Chinese government has recently introduced new restrictions regarding capital controls. This has meant that Chinese investors are looking to find new, innovative ways to transfer money to pay for overseas property or acquire financing. There are obvious restrictions here as great care needs to be taken not to breach anti-money laundering regulations.
Australian and New Zealand banks have tightened their rules regarding the lending of money to foreign individuals and with prices being significantly lower in Thailand, therefore less initial capital expenditure required, an investment in Thailand looks all the more appealing.
How to overcome the challenges
It is a well-known fact that the Chinese buyer is well informed and sophisticated so the survey by Juwai went one step further and asked Chinese investors what would help them to invest overseas.
The following information and comment was sourced directly from the: Juwai Chinese Consumer Survey (March 2017):
“Survey results revealed that 21% desired access to reliable property management services, followed by testimonials from other buyers (17%), indicating the importance of trust.
“Unsurprisingly, Chinese property investors are also looking for more in-depth information about neighbourhood amenities and transportation options (15%), nearby educational offerings (12%), financing institutes and interest rates (11%), as well as immigration services (8%).
“Interestingly, 7% of Chinese real estate buyers also seek information on property tour bookings too, which goes to show how important it is to make sure you get it right by tailoring your property tour specifically for Chinese buyers.”
The Chinese market is certainly looking at investment in Thailand. The challenges that are experienced are in some respects unique and therefore need to be addressed accordingly. An advisor such as ETA, with Chinese speaking team members can offer plenty of assistance to investors so these challenges can easily be overcome – especially if the investor looks more at the rental guarantee concepts options that are available.