other

If they were anywhere else in Beijing, the five young women in cowboy hats and matching red, white, and blue costumes would look wildly out of place.

But here at the city’s biggest international property fair — a frenetic gathering of brokers, developers and other real estate professionals all jockeying for the attention of Chinese buyers — the quintet of wannabe Texans fits right in. As they promote Houston townhouses (“Yours for as little as $350,000!”), a Portugal contingent touts its Golden Visa program and the Australian delegation lures passersby with stuffed kangaroos.

Welcome to ground zero for the world’s largest cross-border residential property boom. Motivated by a weakening yuan, surging domestic housing costs and the desire to secure offshore footholds, Chinese citizens are snapping up overseas homes at an accelerating pace. They’re also venturing further afield than ever before, spreading beyond the likes of Sydney and Vancouver to lower-priced markets including Houston, Thailand’s Pattaya Beach and Malaysia’s Johor Bahru.

The buying spree has defied Chinese government efforts to restrict capital outflows and shows little sign of slowing after an estimated $15 billion of overseas real estate purchases in the first half. For cities in the cross-hairs, the challenge is to balance the economic benefits of Chinese demand against the risk that rising home prices spur a public backlash.

“The Chinese have managed to accumulate very large amounts of wealth, and the opportunities to deploy that capital in their own market are somewhat restricted,” said Richard Barkham, the London-based chief global economist at CBRE Group Inc., the world’s largest commercial property brokerage. “China has more than a billion people. Personally, I think we have just seen a trickle.”

While a dearth of government statistics makes it difficult to gain a comprehensive view of cross-border real estate investments, most industry projections point to a surge in Chinese purchases. Ping An Haofang, an online real estate platform owned by China’s second-largest insurer, says its $15 billion first-half estimate, derived from market data, nearly matches the figure for all of 2015.

Fang Holdings Ltd., the country’s most popular property website, predicts overseas buying on its system will increase 130 percent this year, while transactions through September at Shenzhen World Union Properties Consultancy Inc., China’s largest broker for new-home sales, were already 50 percent above last year’s level. The country overtook Canada as the largest source of residential purchases in America last year after an estimated $93 billion of buying from 2010 to 2015, according to a May report by the Asia Society and Rosen Consulting Group.

It adds up to the world’s biggest-ever wave of overseas residential property investment, according to Susan Wachter, a professor at the University of Pennsylvania’s Wharton School who specializes in real estate markets. While Japan had a similar boom in the 1980s, it was mainly focused on commercial buildings, Wachter said.

Today’s Chinese buyers have a long list of reasons to flock overseas. The yuan’s slump is eroding their purchasing power, while returns on local financial assets — including stocks, bonds and wealth-management products — are shrinking as the $11 trillion economy slows. The Shanghai Composite Index slipped 0.1 percent on Tuesday and a gauge of the nation’s property stocks declined 0.3 percent.

Chinese real estate, meanwhile, has grown increasingly out of reach after a speculative boom sent domestic home prices to all-time highs. Residential property values in Shenzhen, Beijing and Shanghai all jumped more than 30 percent in the year through September, according to the National Bureau of Statistics.

“Properties in Shanghai are ridiculously expensive,” Chen Feng, 38, said as he evaluated prospects at a property fair in Shanghai in September, lured by television commercials for the event the night before. “With the amount of money it takes to buy a small apartment here, I can buy a building of apartments in many places in the world.”

That line of reasoning is nothing new, of course. Sydney, Vancouver, Hong Kong, London and a handful of other cities have long been popular destinations for Chinese buyers.

The difference now is that those traditional hotspots are starting to lose their appeal, due to soaring prices and new measures to deter an influx of overseas money. In Hong Kong, the government enacted a 30 percent tax on foreign property owners this month after Chinese demand pushed home values toward record highs.

The risk of similar measures in other cities can’t be ruled out as politicians including Donald Trump, the U.S. president-elect, tap into local discontent over rising living costs, according to CBRE Group’s Barkham.

Ocean Views

Chinese buyers have responded by branching out to cheaper cities. In the U.S., they’re increasingly searching for properties in Houston, Orlando and Seattle, which displaced San Francisco in the first quarter as the third-most viewed U.S. market on Juwai.com, a Chinese search engine for offshore real estate.

At the national level, countries in Southeast Asia have grown more popular. Juwai.com’s queries on Thailand are surging at a 72 percent annual rate, helping it surpass Britain as one of the top five most-targeted destinations worldwide earlier this year.

In Pattaya Beach, Chinese investors have snapped up 20 percent of the luxury condos on offer from Kingdom Property Co. over the past year. The properties offer Gulf of Thailand views for as little as $120,000, or less than a quarter of what buyers would pay for a typical apartment in central Shanghai, according to Han Bing, a 30-year-old anchor in Chinese television shows who doubles as a sales agent for the Bangkok-based developer.

“It’s a cool bargain for a retirement plan,” Han said.

Capital Controls

In the Malaysian state of Johor, across the Northern border of Singapore, major Chinese builders including Country Garden Holdings Co., Greenland Holdings Corp. and Guangzhou R&F Properties Co. are all developing new projects. Country Garden agents handed out fliers for the firm’s $37 billion Forest City development at the Beijing property fair in September, advertising permanent property rights, zero inheritance taxes, long-term residence visas and high-quality hospitals.

One challenge for Chinese investors is getting money out of a country that caps individuals’ foreign-currency purchases at $50,000 a year. While that limit hasn’t always been strictly enforced, the yuan’s slump is prompting policy makers to clamp down. This year, they’ve banned the use of friends’ currency quotas, curbed on the cross-border activities of underground banks and asked lenders to reduce foreign-exchange sales.

Still, alternative routes abound. Many business owners finance their homes through offshore trading companies, while some Chinese developers allow clients to pay for overseas units in yuan. Foreign-currency mortgages also play a role, helping to fund more than 80 percent of China’s international property purchases, according to an estimate by Fang Holdings based on user searches and surveys.

Planning Ahead

“Where there’s a will, there’s a way,” said David Ley, a professor at the University of British Columbia who wrote a book on the flood of wealthy migrants from east Asia in the 1980s and 1990s.

This year’s purchases could be just the tip of the iceberg. Chinese holdings of global real estate, including commercial properties, will probably swell to $220 billion by 2020 from $80 billion in 2015, according to Juwai.com.

As the first generation born after China’s opening in the late 1970s approaches middle age, many of them want an overseas base for family members to travel, study and work. Chinese parents with children at foreign schools have been a major source of demand, accounting for an estimated 45 percent of cross-border buying, according to Fang Holdings.

Zha Liangliang, a 31-year-old owner of commercial wheat farms in China’s eastern Jiangsu province, said he purchased a $587,000 apartment in Sydney in August and plans to add five more before sending his children to high school in Australia. He’s flying to the country this month to view homes and farmland, hoping to buy before the yuan weakens any further.

For some investors, it’s never too early to pull the trigger. Richard Baumert, a partner at Millennium Partners Boston, tells the story of a 33-year-old Chinese man who purchased a luxury home for his future children in August, convinced they’re destined to attend one of the city’s prestigious universities.

The buyer shelled out $2.4 million for the property, Baumert said, unfazed by the fact that he’s single and it could be two decades before he has kids old enough for college.

©2016 Bloomberg L.P. All Rights Reserved

Finding the right fit in Abbotsford

? MICHAEL BERNARD
The Vancouver Sun

Project: Allwood Place

Project location: 2800 Allwood St., Abbotsford

Project size: A master-planned community of 224 townhomes, with the first phase of 32 two- and three-bedroom townhomes, and the Alder Club, an amenity building that includes a gym, a lounge area with kitchen, a theatre room and indoor and outdoor play areas. Prices starting from $389,900 for homes ranging from 1,155 to 1,300 square feet.

Developer: The Onni Group

Architect: Yamamoto Architecture, Vancouver

Interior Designer: ONNI

Sales Centre: 2800 Allwood St. Abbotsford

Sales Phone: 604-260-6797

Occupancy: February 2017

Younger families looking for more space and lower housing prices might consider following some of Vancouver’s big developers that are starting new townhouse projects in such Fraser Valley communities as Abbotsford.

Anticipating strong demand for more affordable housing, The Onni Group has begun construction — its first in Abbotsford in a decade — on a new master-planned community of 224 townhomes called Allwood Place, with prices as much as $50,000 less than comparable products in nearby Langley, says company spokesman Sam Jenkins.

“You are seeing more and more people looking for affordable housing options, and those options are farther out in the suburbs,” Jenkins said.

“The market has changed a lot even in the last three to four weeks. In Langley, you are spending mid to high $400s for two- to three-bedroom townhomes and into the $500s easily. You go 25 minutes down the road, you get into a townhouse in Abbotsford, for our project in particular, in the high $300s. There is definitely a discount for taking that extra 25- to 30-minute drive.”

While Jenkins says there have been some investors attracted by the positive cash flow provided by a strong rental market in Abbotsford, the majority of interested parties are “move-up” buyers, looking for alternatives to owning a smaller condo apartment or renting a basement suite.

“You still get a little bit of a back yard or a front yard. Even though you are part of a strata, it still feels like your own little independent space compared with highrise or low-rise condos.”

The 32 homes in the first phase of the 224-unit development are either in the Georgian or Craftsman style with steeply pitched roofs, oversized patios, fixed window shutters and planter boxes that create a pleasing heritage character to the new neighbourhood, which was formerly a trailer park. Lush landscaping and pedestrian walkways are threaded throughout the development.

All homes share in a common amenity building called the Alder Club, which will contain a large fully equipped gym, indoor and outdoor children’s play area, yoga and meditation space, cinema theatre, games rooms and a party room with kitchen.

What differentiates Allwood from other nearby townhouse developments is that it is located in the “heart of Abbotsford” with Save-On Foods, coffee shops and other community amenities within walking distance, said Jenkins.

“There are a lot of options as opposed to getting into your car and driving for five to 10 minutes to go shopping,” he said. “That’s a huge benefit, and we are hearing a lot of feedback about our location.”

For commuters, the West Coast Express is only 13 minutes away by car with the future advantage of the railway connecting to the SkyTrain system next year for an easy trip to work in the city, he said.

Inside the homes, large vinyl framed double-glazed windows allow lots of natural light into the large rooms. Contemporary wide-plank laminate flooring is provided throughout the living and dining areas, in the kitchen and most entryways. The bathrooms are equipped with 12-by-24-inch porcelain tile, while bedrooms come with carpeting. All suites come with full-sized stacking Whirlpool high-efficiency washers and dryers.

The homes are heated with thermostat-controlled electric baseboard heating.

Modern flat-panel cabinetry with soft-close mechanisms are standard for all kitchens, which also have quartz composite countertops with breakfast bars. Stainless steel Whirlpool appliance packages include a 19-cubic foot refrigerator with bottom-mount freezer, a 30-inch slide-in electric range, an Energy Star rated dishwasher and below-counter microwave.

Private master ensuite bathrooms include a walk-in shower with floor to ceiling tile surround, while main bathrooms have a tub-shower combination.

All homes come equipped with 2-5-10 year new home warranty protection, with two-year coverage on labour and materials, five-year coverage on the building envelope, and 10-year coverage on major structural items.

Allwood Place, By the Numbers:

13: approximate commuting distance to the West Coast Express, in minutes  

32: number of townhomes in the first offering

224: total number of homes in the master-planned community

1,300: size of the largest townhomes, in square feet

© 2016 Postmedia Network Inc.

East Vancouver area plan churns up ?rush of realtors?

MATT ROBINSON
The Vancouver Sun

East Vancouver is open for business, with eager realtors amassing blocks of homeowners willing to cash out of their houses and make way for multi-unit developments.

In Grandview Woodland, neighbouring homes along Nanaimo Street and East Broadway are listed at prices far greater than their assessed values. As expensive as single detached homes are in Vancouver, assembled land on arterial roads in the area now primed for rowhouses, townhouses and condos is far more valuable.

Take, for example, a four-bedroom, 1950s house at 2085 East Broadway with an assessed value of about $900,000 and an asking price of $4.2 million.

“LOCATION! LOCATION! Land assembly potential, this property falls into the New Zoning just approved by City Hall for 6 storeys,” states the real estate listing, which refers to the Grandview Woodland Community Plan, recently passed by city councillors.

Another half dozen homes within a couple blocks to either side are listed with prices ranging from $1.8 to 2.8 million.

Ask Anne McMullin, the president and CEO of the Urban Development Institute, if there’s a land rush in East Vancouver, and she’ll tell you there’s not – not right now, anyway. 

“I wouldn’t call it a land rush,” McMullin said in a recent interview. “I would say that maybe it’s a rush of realtors.”

While major developers like Intracorp, Westbank, Onni, Wesgroup and Reliance have already bought property in the area during the last few years in anticipation of the new area plan, realtors may be banking on interest from smaller developers, she said.

“I would expect there to be huge interest in Grandview Woodland land assemblies. The plan has been five years in the making. There’s enormous pent up demand,” she said. “There’s very, very little area that has opened up for development and they’ve opened up the door, I suppose (with the area plan).”

When asked why land isn’t being snapped up the moment it hits the market, McMullin said local developers won’t buy at prices they don’t think the market can bear. “Where the prices will come in, I don’t know, but there’s certainly great interest in the busiest hub in the region.”

Further east and south, other pockets of neighbouring houses are on the market for prospective land assemblers. 

Six homes in the 500-block of Renfrew St. are listed by realtor Niko Lambrinoudis for $2.5 million apiece (their assessed values range from $800,000 to $1 million each).

“LAND ASSEMBLY. Please do not walk on properties or disturb the owners,” reads the property descriptions of each of the homes.

The realtor has many other homes listed with similar descriptions in neighbouring areas along routes like Nanaimo St. and Broadway. He has previously sold assembled listings along Renfrew St. and is actively seeking to assemble more land on that street, according to residents. Lambrinoudis did not reply to a request for comment.

On the 700-block of Renfrew St., another line of homes is listed for $2.5 million each by realtor Tariq Malik.

As Malik explained, the block of homes he is trying to sell is eligible to be redeveloped under the City of Vancouver’s interim rezoning policy for affordable housing. The interim policy is citywide and intended to boost the supply of below-market housing, but it has a 20-project cap. A dozen of those projects have already been accounted for.

Each of the blocks mentioned in this article are covered by the interim policy or the Grandview Woodland plan.

© 2016 Postmedia Network Inc.

New regulations for mortgage brokers give borrowers a fuller picture on loans

JOANNE LEE-YOUNG
The Vancouver Sun

B.C.’s Ministry of Finance will introduce tougher guidelines for the approximately 3,400 registered mortgage brokers it oversees in the province.

Brokers will have to disclose the specific dollar value of any regular commissions they make. In addition, there is now a longer-than-expected list of non-monetary items and interests that must be revealed by a broker to a borrower about what he, she or the firm they work for might gain in taking a deal to a certain lender. 

In sum, borrowers will have a fuller picture about why a loan is presented to them by a mortgage broker. These brokers connect clients, who want to borrow money for buying a home, to networks of lenders that include banks and credit unions, but also institutional lenders who do not take deposits, and individuals. They are supposed to help clients shop around for the best rates and service and, generally, act in the best interest of a borrower.

However, some brokers are upset about having to disclose basic commission amounts and argue that most borrowers focus on the rate they are able to find and not what they make on each deal.

Where things will get more complicated is how these new disclosure requirements reveal the kinds of conflicts that can be unknown to a consumer and are, sometimes, even challenging for individual brokers to calculate. 

In some cases, brokerage firms are receiving lump sum payments, also known as “access fees,” in return for passing borrowers to a preferred lender. Brokers themselves may not be aware that aside from bonuses they can earn based on volume of completed deals passed to one lender, their employer is taking another cut.

Chris Carter, acting registrar of mortgage brokers at the province’s Financial Institutions Commission or FICOM, described the list of interests that will now need to be disclosed as a “non-exhaustive” one.

“We want brokers to be fully describing their conflicts, so we didn’t want to be prescribing what those might be,” he said, adding that all the new guidelines were prompted by conflicts of interest found by FICOM in actual cases. “You can assume the (situations described) aren’t hypothetical.”

Samantha Gale, CEO of the Mortgage Brokers Association of B.C., said she understood the rationale of the Ministry of Finance.

“They saw escalating house prices and they are concerned about debt,” Gale said. “There has been a call on all levels of government-municipal, provincial and federal-to take action and to do something.”

She said mortgage brokers are unhappy that the new disclosure guidelines will put them at a competitive disadvantage when consumers compare them against mortgage specialists who work for banks. Mortgage specialists are not regulated by FICOM and will not be subject to these new rules, said Gale.

However, she added the new guidelines “are more onerous than we had expected. We would have liked a more gradual approach, one that sought consultation with key stakeholder groups.”

To illustrate the nuances that might have been gleaned from doing this, one broker explained that if he takes ten deals to one lender, he is more likely to get better service on a “sticky” deal in that bunch that otherwise would have been challenging to complete. This might be seen as going against the ideal of seeking the best deal for every individual loan applicant, but there can also be upside for a borrower when brokers have ongoing relationships with certain lenders.

Carter said: “That’s the entire point. To shine a light on the mechanics of how this works so the consumer has tools to understand the difference between lenders and to ask ‘what is influencing your advice? Do you have preferred lenders? How does it work?”

“Our fundamental belief is that this is about transparency and we have confidence that brokers can and will explain their structures.”

The new rules, which will be effective on June 30, 2017, come after Ottawa last month brought in tighter mortgage rules that make it harder than before to qualify for home loans and after intense scrutiny in B.C. over conflicts of interest in real estate transactions. But the process of developing them actually “predated these recent developments,” said Carter. 

© 2016 Postmedia Network Inc.

Steve Randall
REP

The talk of an empty homes tax in Vancouver is to become a reality. The city council says that it will be introduced by January 1, 2017.

“The City won’t sit on the sidelines while over 20,000 empty and under-occupied properties hold back homes for renters struggling to find an affordable and secure place to live,” says Mayor Gregor Robertson.

The city will discuss further details at a meeting next week but it has already given some details.

The tax will be 1 per cent of a home’s value and with many homes in the city costing more than $1 million, it would mean a charge of at least $10,000. However, principal homes will be exempt – good news for snowbirds – and there will also be exemptions for homes rented out for at least 30-days in a row for at least 6 months of the year.

Homes that are being renovated or where owners are receiving medical treatment will also escape the tax.

Those who try to avoid the tax by not declaring their property as empty would face a penalty of up to $10,000 per day until they comply.

Copyright © 2016 Key Media Pty Ltd

City proposes one per cent levy on vacant homes

Laura Kane
The Vancouver Sun

Vancouver is proposing a one-per-cent tax on the value of empty homes in an effort to increase the vacancy rate in the city’s incredibly tight rental market.

Mayor Gregor Robertson unveiled the plan Wednesday. It would become the first of it kind in Canada if approved by city council.

All homeowners in Vancouver would be required to self-declare whether a property is their principal residence where they receive mail and file their taxes.

Homes that aren’t principal residences and aren’t rented out or exempted for a number of other reasons would be taxed on the assessed value. That means a $1-million home would be taxed $10,000.

Robertson said the main goal of the tax was not to raise revenue but rather to encourage owners to rent out their properties in a city with the lowest rental vacancy rate and highest rents in Canada.

“We are in a housing crisis here and we need to take action,” he told a news conference. “People are feeling squeezed on all sides.”

A city-commissioned study in March found at least 10,800 homes were sitting empty in Vancouver for a year or more, most of them condominiums. More than 22,000 homes were unoccupied or occupied by temporary residents on census day in May 2011.

“It’s absolutely unacceptable for all that housing to be treated as a commodity first, as a business holding, when housing is in such short supply,” Robertson said.

The province passed an amendment to the Vancouver Charter in July allowing the city to create the tax. Staff have consulted with the public, met with local experts and sought input from cities around the world with vacancy taxes, including Paris and Jerusalem.

The proposal is set to go before council next week and staff hope to have the tax in place for the 2017 year, with the first payments expected in 2018.

Robertson stressed that most homeowners, including snowbirds, would not have to pay the tax.

The tax would be levied on non-principal residences that are left empty for six months out of a year or longer, but staff have proposed eight exemptions.

The exemptions include: properties under renovation or construction with valid permits; homes that are empty because the occupant is getting medical care or has recently died; condominiums that are subject to existing strata rental restrictions; and properties that the owner uses for work purposes for six months a year but claims principal residence elsewhere.

As for enforcement, the city is proposing to audit homeowners on a targeted and random basis. Owners would be required to provide evidence such as a B.C. driver’s licence, medical services card or vehicle insurance that proves the home is their principal residence.

Owners would be able to appeal, and the city would establish a vacancy tax review office to handle complaints filed by owners who claim the tax has been applied to their property in error.

Homeowners who fail to pay the tax would face a five per cent late payment penalty. If they still haven’t paid by the end of the year, the outstanding balance would be added to their property tax account and accrue daily interest.

Those who fail to declare the status of their property by the second business day in February would see their units deemed vacant.

Anyone who makes a false declaration could be prosecuted by the city with a maximum fine of $10,000 per day of the continuing offence.

It will cost $4.7 million through the end of 2018 to set up the tax, with an annual cost of $1.5 million after that. But the city expects tax revenue to cover the costs, with some money left over for affordable housing initiatives.

© 2016 Postmedia Network Inc.

$20 billion ? that?s how much Alibaba?s Singles? Day is expected to rake in tomorrow in terms of sales.

Juwai
other

Singles’ Day – the world’s largest retail event which generated a whopping $14.3 billion in sales last year in a single day – kicks off in China on 11 November. Popularly known as ‘双十一’ (which means ‘Double Eleven’ in Mandarin) or ‘11.11’ in China, early signs suggest that Singles’ Day is well on its way to becoming a global phenomenon.²

How did Singles’ Day come about? It first began back as a student festival at Nanjing University to celebrate singlehood back in 1993.³ Today, it has evolved into a day on which China’s single people shop for gifts as a treat for themselves.

The date, the 11^th day of the 11^th month, is seen as significant for the four 1s, and originally saw single people spending the day by partying with single friends.

Since its humble beginnings, Singles’ Day has evolved into becoming not only a national retail phenomenon, but also into the world’s largest online retail event far surpassing Black Friday and Cyber Monday, which merely netted $1.7 billion and $3.1 billion, respectively, in 2015⁴, compared to the $14.3 billion gleaned by Singles’ Day.

3 big things expected for Singles’ Day 2016

This 2016, China’s major online retailers such as Alibaba and JD.com are pulling out all the stops to make this year’s Singles’ Day event bigger than ever. Here are three things to expect this year:

#1 Major star power for global glitz and attention

David Beckham, Kobe Bryant, and One Republic have been slated to grace Alibaba’s Singles’ Day Countdown Gala on 10 November, lending it the star power necessary to grab attention from international consumers far and wide. What’s more, the Countdown Gala will be produced by none other than David Hill, the producer of X-Factor and Superbowl, who has vast experience in delivering events that capture worldwide attention.⁵
 

#2 Walmart will launch a Global Store on JD Worldwide

This Global Store on JD Worldwide – JD.com’s cross-border platform – will offer exclusive deals on overseas products for Singles’ Day, and provide a two-hour home delivery service from more than 20 Walmart stores nationwide.¹ Analysts at Industrial Securities estimate that 2.68 million couriers will be employed on the day, and will deliver 1.05 billion packages – 35% more than last years’ Singles’ Day.⁶
 

#3 Alibaba will go hi-tech and unveil a new world of shopping

The company has also unveiled a virtual reality shopping experience, which allows consumers to connect their smartphones with a VR headset and make purchases as if they were in a physical store in New York City.⁵ Besides that, Alibaba also has a fashion show lined up, featuring items from international brands that can be directly ordered for purchase whilst viewing.¹  

Global brands and buyers becoming increasingly involved

What do KFC, Starbucks, Burberry, Maserati, Apple, Estee Lauder, Samsung, Nike, and Zara have in common? Singles’ Day, that’s what.

Having recognised this huge opportunity that allows them to directly connect with millions of Chinese consumers, as well as the huge potential from Chinese consumers’ passion for overseas products, these big brand are all launching promotions and online events for Singles’ Day 2016.

Over 5,000 international brands from 25 countries joined in the 2015 Singles’ Day event on Alibaba’s TMall Global page, which saw more than 30 million Chinese consumers buying imported products.²

Last year, products from the US and Japan received the most amount of orders, followed by other major markets including South Korea, Germany, and Australia. Interestingly, these countries are generally known for their product safety and quality, so this is telling of the growing discernment of Chinese, who now seek and demand for quality goods, if not the best, for themselves and their loved ones.

One thing that has become more apparent, though, is that Singles’ Day is no longer just big in China. Singles’ Day 2015 saw more international shoppers than ever, with AliExpress – Alibaba’s international platform for overseas shoppers – handling 21.24 million orders sold by 62,800 retailers to overseas buyers.⁷

Singles’ Day: a reminder of why China is such a lucrative opportunity

Retailers both domestic and overseas have acknowledged the Singles’ Day event as a great opportunity to directly connect with millions of consumers, and to capitalise on their growing preference for overseas products, which is perceived to be of a more trusted quality.

Alibaba alone saw 467 million delivery orders during last year’s Singles’ Day, and that’s because it aimed the event squarely at China’s massive population of internet users, which numbered an impressive 688 million users at the end of 2015⁸ – 620 million whom were mobile internet users.

Singles’ Day is yet another perfect example showcasing the power of using an online channel to tap into the world’s most lucrative and fast-growing consumer base.⁹

The Chinese market is expected to generate an astonishing RMB 7.5 trillion ($1.1 trillion) in sales by 2018, according to Jefferies Group.⁹

And while the size of the market is tempting for any China-focused real estate executive, what’s more crucial to note is that Singles’ Day not only shows the importance of using online platforms to access the China market via a direct and cost-effective way, but also shows the importance of holidays and festivals as being key times to capitalise on China’s huge market potential.

Notable examples include Chinese New Year and National Day Holiday, known as Golden Week, which see most of China’s working population (estimated at some 760 million people) take holidays and indulge their passions for travel and real estate investment.

That said, with the 2017 Chinese New Year Golden Week scheduled for 28 January, it’s certainly time for agents and developers to get their profiles and marketing plans up and ready for Chinese – even more so as we’ve seen a 37% increase in Chinese buyer enquiries for overseas property on Juwai.com YTD as of end of September, which heralds a potential deal bonanza in the coming months that you’d be loathe to miss out on.

2016 © Juwai.

Ephraim Vecina
Mortgage Broker News

Fresh data from the Real Estate Board of Greater Vancouver revealed a massive 38.8 per cent year-over-year decline in home sales last month, a development that has provoked anxiety among observers wary of the effects of a recently-implemented foreign buyers’ tax and far-reaching changes to federal mortgage rules.
 
Experts warned that the combination of the tax and the regulatory revisions might prove too much for the Vancouver market, which is already exposed to major housing risks due to overheating and overvaluation.
 
“[Vancouver] is in a full-blown correction,” David Madani of Capital Economics told CBC News. “Introducing [the new rules] now, the risk is that this could be the trigger or catalyst that everyone fears the most.”
 
Madani added that the October numbers represented the continuous decline of sales volume in the city, which began approximately February this year.
 
“I do think the Vancouver market is going to have a very, very hard landing that will probably drag out for a few years potentially.”
 
The analyst hastened to add, however, that this correction should be attributed to the credit cycle that led to record-low interest rates and a heavily leveraged client base, rather than to the foreign buyers’ tax.
 
“Anything that reduces the amount of credit available to purchase a home will slow the market down,” Madani explained. “So the housing mess that’s been created over the past decades or so, it’s not just about low interest rates, it’s about the increased leverage in the system.”
 
These sentiments echoed those of Dominion Lending Centres’ Dustan Woodhouse, who earlier this month stated that the regulatory revisions burdened middle-class would-be home buyers unnecessarily.
 
“It is also worth noting that previous to Oct 17, 2016 the income required for this same purchase price was ~$88,000.00 per year. In other words an experienced police officer, teacher, nurse, or firefighter could pretty much pull that $597,000.00 purchase off on their own income.”
 
Woodhouse argued that instead of getting at the root of the price growth problem, the new rules only succeeded in penalizing would-be buyers who have stable verified income streams, exemplary credit scores, and no consumer debt loads.
 
“They [will need to] get themselves a $20,000 raise before they buy what they could have bought. Exactly what so many before them have bought, and what just ~0.30% of CDN’s ever stop making payments on.”

Copyright © 2016 Key Media Pty Ltd

B.C. and Metro disrupted, but still a safe real estate bet: CBRE exec

Evan Duggan
The Vancouver Sun

A surprise tax slapped on foreign property buyers by the provincial government. A severe shortage of industrial space across Metro Vancouver. A stronger than expected downtown office market.

Any way you look at it, 2016 has been a mixed-bag for commercial real estate in this city and the province.

Paul Morassutti, executive vice-president and managing director of CBRE in Canada, discussed those issues and more at the Vancouver Real Estate Strategy and Leasing Conference on Nov. 1 with a keynote speech focused on the outlook for real estate in B.C. and in Canada. The following are excerpts from his presentation and a one-on-one interview with Postmedia News:

On the stormy global backdrop:

“Nearly a decade after the financial crisis necessitated a slashing of interest rates around the world, rates have barely moved. The Bank of Canada cut rates twice last year, they came close again two weeks ago, and rates in the EU, Sweden, Switzerland and Denmark moved into negative territory; something virtually unheard of in the past 5,000 years that humans have been lending money. Why? Because economic growth is stagnating and growth estimates everywhere including Canada continue to be revised downward.”

On Canada weathering and benefiting from the global storm:

“It is driving capital to Canada. Investment activity blew the doors out on the first half of the year, surpassing our two previous peaks of 2012 and 2007, and all signs point to an equally strong second half. Investment activity also included a record number of foreign investment, and nowhere has that been more apparent than here in Vancouver. To date, foreign capital has targeted Vancouver and Toronto and, to a lesser extent, Montreal. The world continues to de-risk, and on a global basis Canada is about as safe a bet as there is.”

On the biggest B.C. real estate surprise of 2016:

“No one really expected a 15 per cent tax on foreign buyers. I certainly acknowledge that something had to be done, and I certainly acknowledge the political reasons for trying to tamp the market down. My concern with that particular policy is I’m not a big fan of any policy that isn’t based on sound facts, and we simply don’t know what the numbers of foreign buyers are. We were guessing. The same is true in Toronto and when you build a very punitive policy around data that isn’t well supported, that makes me a little nervous … It does seem to send a message to their Chinese investment community that maybe you’re not wanted in Vancouver.”

On the biggest threat to this market in 2017:

“No. 1 at the top of my list in all capital letters is the housing market. The housing market began to decelerate well before [the foreign buyer] tax came into place. If we were to see a really substantial downturn in the housing industry, there [could be] a corollary effect on the construction industry, a huge part of the economy. And the impact on consumers of having their houses now be worth less is there’s going to be a knock-on effect to the economy. If the housing market were to really unravel in a real way, that sends up a huge red flag for me.”

On the surprising resiliency of the Canadian retail industry:

“Is the retail sector challenged by technological change? Of course it is. Is it recalibrating? Of course it is. But let’s consider a few facts: with 4.3 per cent growth year-over-year, core retail sales are on pace to surpass recorded growth since 2010. Mall sales did slow somewhat in 2016 but they remained well above the 10-year average. Each retail format experienced decreases in vacancy, year-over-year. Retail rates outperformed most other sectors in 2015 and 2016, and in Vancouver the new Nordstrom has been a very strong anchor since opening in the Pacific Centre last fall and traffic in the mall is up 30 per cent. So clearly it is not all doom and gloom.”

On the effects of a millennial generation that doesn’t want things:

“The selfie generation is much less interested in buying cars or owning a house. Baby boomers may shake their heads in disbelief, but traditional consumption isn’t what motivates young people. This will probably provide as much disruption to retail as e-commerce will.”

On the Canadian office market and special case of Alberta:

“The perception is that the market is oversupplied, but when you look at construction as a percentage of total inventory, the office market is actually quite balanced. And let’s face it: you have Alberta and you have everything else. The office market in Alberta is about as bad as it has ever been. It will get worse before it gets better and no one really knows how long it’s going to last. The good news is that office ownership in Alberta is in highly concentrated institutional hands who have the scale to weather a few years of additional misery in a small portion of their overall portfolio, especially when they are booking substantial gains in virtually all other parts of the country.”

On the rise of technology:

“CBRE recently completed a comprehensive analysis of North America’s top-40 technology markets. On the basis of tech sector job growth, Toronto and Vancouver ranked seventh and 14th, respectively. Toronto is in pretty good company, sandwiched between Silicon Valley and New York … Workplace strategies are also evolving as the war for tech talent intensifies. Space is becoming more flexible and collaborative, while also embracing health and wellness initiatives. If you haven’t heard of something called the Well Building Standards, you will soon. It’s essentially LEED-certification for wellness with an emphasis on things like indoor air quality, water quality, etc. And just like the LEED standards, it will increasingly become the norm.”

On optimism over pessimism, despite Alberta’s troubles, slow growth, digital disruption and a dubious housing market:

“While each of those issues is very real, I do believe the case for optimism is stronger. Slow growth means interest rates aren’t going anywhere in Canada for awhile. While national growth is indeed slow, regional rates vary dramatically and are quite healthy here in B.C. and in Eastern Canada. Capital is abundant both domestically and globally … Global uncertainty and lack of investment alternatives plays in Canada’s favour. And lastly: Vancouver, San Francisco, Hong Kong, Manhattan. Enough said.”

© 2010-2016 Postmedia Network Inc.

Hong Kong recently increased their stamp duty on foreign buyers from 15% to 30%

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This not only means it’s now more expensive for non-residents to buy property in the city, but also means that Chinese buyers – who long have considered Hong Kong a notable playground for them – will now be casting their eyes elsewhere in search of better deals.

After all, Chinese demand for property remains robust, and with the recent property cooling measures implemented nationwide in China, the prospects for Chinese real estate investments in global markets is stronger than ever.

Buoyed by other fundamental factors, such as the RMB’s depreciation – 6% against the USD during the past 12 months² – as well as  mainland buyers’ surging familiarity and soaring interest in outbound travel and lifestyles abroad, the Chinese are set to become an even more lucrative market for international agents and developers in 2017.

Hong Kong government moves to cool red-hot property market

Hong Kong real estate – already considered one of the least affordable housing markets in the world – has seen its prices continue rising throughout the year, especially in recent months.

To counter this, Hong Kong’s government recently swung into action by adjusting the rate of real estate stamp duty for non first-time buyers – both individuals and companies – to 15% of the property value.¹

Foreign buyers, who are already charged with an existing 15% stamp duty rate, must now pay an extra 15% – making it a 30% stamp duty fee on the price of a property.³

And although the government have also pushed the largest supply of new housing in H1 2016 in a bid to dampen price growth and provide more affordable housing⁴, prices have not behaved in line with the government’s hopes.

Mainland buyers slated to move on from Hong Kong

It’s vital to note that one of the biggest contributing factors to Hong Kong’s surging real estate prices comes from increasing demand from China-based buyers – many who sought to escape purchase restrictions imposed onto China’s domestic market, and to shield their assets from the RMB’s recent devaluation.

What drove mainland Chinese buyers to Hong Kong? Two reasons: the RMB’s depreciation, and the fact that investor options in China have narrowed and price growth prospects weakened after the Chinese government increased sales taxes, tightened mortgage criteria, and cracked down on multiple home purchases to cool price growth in mainland cities.¹⁰

Now, with this new 30% stamp duty taxed on foreign buyers though, Hong Kong properties will no longer be as attractive as before to mainland property investors. Yet these two same factors, fuelled by the Chinese incessant hunger for property ownership, remain the same, and thus, this will continue to push Chinese property investors to seek for other opportunities out of China and Hong Kong in the near future.

So where would this surge in demand from Chinese buyers for overseas properties go next?

4 upcoming Chinese investment hotspots to eye

While it’s still early days yet, we’ve seen these hotspots receiving much attention from Chinese buyers lately, and we believe this 30% foreign buyer tax in Hong Kong may further boost Chinese property investor interest there in the following months.

United Kingdom (UK)

Chinese buyer enquiries for British properties rose 30% to 40% on Juwai.com approximately four weeks after the Brexit referendum, with a record number of enquiries from Chinese buyers charted on Juwai.com in September.¹¹ With the sterling still weak and at a 30-year low¹¹ amidst the continued uncertainty on whether Brexit would happen, Chinese property hunters have been quick to strike while the iron’s hot (especially in London), and we foresee this trend will continue onwards into the new year.
 

South Korea

Chinese buyers are moving inland away from Jeju Island to Seoul¹² – property sales in Seoul to Chinese investors have tripled so far in 2016.¹³ With China being just a few hours away from South Korea (Beijing is just a three-hour flight away from Seoul), combined with the seemingly undying Chinese love for all things Korean – celebrities, music, drama, cosmetics, fashion, cuisine, to name just a few – we expect Chinese buyer presence in South Korea to continue growing down the road.
 

United States (US)

Chinese buyers maintained their position as the dominant buying force in the US, accounting for some $27.3 billion worth of residential property sales, according to the latest figures by the National Association of Realtors (NAR).¹⁴ Will Chinese property investment increase now that Donald Trump is officially set to become the next US President? We’ll be keeping an eye on the US, that’s for sure.

Malaysia

Chinese buyer enquiries for Malaysian properties on Juwai.com soared 550% in the year to August 2016.¹⁵ Furthermore, with the news that Alibaba tycoon Jack Ma has been appointed as the digital economy advisor for the Malaysian government¹⁶ following Malaysian Prime Minister Najib Razak’s third official visit to China just a week ago¹⁷, this could send some additional Chinese attention over towards Malaysia.

Chinese market to become even more lucrative market in 2017

The Bank of America Merrill Lynch has forecasted a decline of 5% – 10% in sales and a softening in prices for China’s real estate market.¹⁸

This, combined with the CLSA’s prediction of a further 18% devaluation of the RMB – RMB 8 to the USD – means the Chinese property market is expected to cool further in 2017.¹⁹

What this really means, though, for international agents and developers, is that prospects are strong for increased demand for overseas properties emerging from China over the next 12–18 months.

In short, what has been a lucrative China market – worth some $93 billion in residential sales in the US between 2010 and 2015²⁰ – is poised to look even more attractive than before.

So, be sure to ramp up your marketing activities to target Chinese buyers in the coming months, especially as Chinese New Year – China’s first golden week of 2017 and a major sales season for real estate agents selling to Chinese buyers – is fast approaching, and will kick off on 28 January 2017.

2016 © Juwai.