n June 2013 I was fortunate enough to attend the Christie’s International Real Estate Conference in New York City and hear Elizabeth Harrington of the Hurun Report speak about China, real estate and the tidal wave of wealthy Chinese coming to Canada and the US. The Hurun Report is the leading research company on the ultra rich in China.
By 2016 China will be the largest economy in the world. The amount of wealth in China is staggering and growing at a very rapid pace. Today China has over 750,000 billionaires and over 4 million millionaires.
Chinese billionaires and millionaires are much younger than the average age of wealth creation in Western countries. China’s wealth has been created since about 1992 when Deng Xiaoping announced the open door policy but particularly started to grow in 1997 when China began developing its major cities like Shanghai, Shenzhen and Beijing. So most of the Chinese billionaires are in their mid 50’s and the millionaires are in their mid 40’s with the average age of the Chinese millionaire being 43 years old. It is their children that will be the second generation leaders of China taking over their family companies.
Most of the Chinese billionaires and millionaires live on the east coast of China specifically in the cities of Beijing, Shanghai and Shenzhen.
There is a famous saying in China “Women hold up half the world” and until now it’s been a well kept secret the large number of women entrepreneurs in China who have played a major role in the growth of China’s economy. Of the top 15 wealthiest women in China, 11 are entrepreneurs and 60% derived their wealth from the real estate sector. Only 3 of the women obtained their wealth through inheritance.
60% of wealthy Chinese individuals plan to emigrate. The main reasons for emigrating are education and wealth preservation. Canada, after the United States is the most popular immigration destination. As the largest and wealthiest city in Canada, Toronto and its surrounding areas continues to attract the largest number of high net worth Chinese followed by Vancouver.
Another common sentiment in China is “Get rich and get out”. The Chinese stock market is volatile. Many wealthy Chinese are concerned about wealth preservation as growth is slowing in China bringing uncertainty about China’s future. Wealthy Chinese are looking to diversify overseas and get their money out.
Overseas investment is growing very quickly and Hurun research shows that one third of Chinese high net worth individuals plan to invest overseas in the next 3 years and 50% plan to invest in real estate overseas.
Why invest in real estate in North America?
Many of the people who are in the billionaire/millionaire category in China made their money in property development so they understand real estate. Culturally the Chinese like to buy things that are tangible, they really understand brick and mortar. Real estate values in China are much higher and they feel that they are in a bubble right now to the extent where the Chinese government has put limitations on how much real estate one can buy. In China you never really own the land. Whenever you buy or develop real estate you only have 99 year rights to the land. Unlike in Canada and the US, where you own the land free and forever and current interest rates are low and coupled with a comparatively weak dollar.
Education is a critical driver of Chinese coming to North America. Education is the number one thing Chinese people invest in after they have covered the necessities and basics of life. The number one investment that wealthy Chinese individuals will make is in the education of their children.
Canada ranks third after the US and the UK as the top destination for overseas education by the Chinese.
Increasingly wealthy Chinese are not only sending their children to North America for university, but also for high school and middle school. Wealthy Chinese want their children to get a better education that teaches critical thinking and innovation. They also want their children to be fluent in English and comfortable with the North American educational system so that by the time they apply to college they have a better chance of being accepted to the top universities.
Overseas education drives overseas travel as parents have to visit and put their children in school. Immediately after that they purchase a condo for the student if in university or it can be a home for the family if the child is in high school.
Hurun asked its wealthy readers what were their favourite sports. From both men and women it was swimming and golf. This reflects that wealthy Chinese buyers are particularly interested in properties that have any kind of a water front element whether it’s a beach or just water views and they are very interested in properties that are near golf courses.
The element of water ties in with their belief in feng shui. Feng shui means wind and water and is not just superstition but rather a true belief by the Chinese in the relationship between fire, earth, wind and water. A house that faces south is extremely important to them.
Three Market Segments of Wealthy Chinese Buyers
Chinese students in college or high school. Their wealthy parents tend to buy apartments in high rise buildings always in good and safe neighbourhoods. If the student is in high school or middle school they tend to buy single family houses in neighbourhoods with a good public school system or near their private school of choice.
Senior management teams from Chinese companies acquiring companies in Canada and the US. These senior managers are millionaires and tend to buy properties that are considered a good investment. A good house or building, in a good neighbourhood, with good schools. They see it as an investment, not a home for their children as students and not as a permanent place to live.
The Ultra High Net Worth Chinese Buyers. This is the true billionaire class. They are looking to experience the American dream at the ultra luxury level. They’re buying luxury condominiums and single family homes that are trophy properties in prestige areas. Their criteria for buying an ultra luxury property is that it’s in a prestigious location, it’s on the water, it has history and has development potential.
Victoria Boscariol is a real estate agent in Toronto Canada with Chestnut Park Real Estate Limited Brokerage and exclusively affiliated with Christie’s International Real Estate. With over 15 years experience, she has worked with Buyers from around the world moving to Toronto from China, Russia, Brazil, India, South Africa, United Arab Emirates, Jordan, Cyprus, Italy, Germany, The United Kingdom and Australia.
Get The FREE App! Read the latest issue of Christie’s International Real Estate Magazine On Your iPad