April 14, 2011 / 3:03 AM / 9 years ago

FEATURE-Stymied at home, Chinese hunt for property abroad

* Chinese families buying foreign residential units, not yet in commercial market

* Country’s capital controls crimp their property purchases abroad

* Developers, insurers looking at foreign real estate, deals not materialised

By Langi Chiang and Koh Gui Qing

BEIJING, April 14 (Reuters) - Amanda Sun bought three houses in Australia’s coastal city of Gold Coast after visiting the town just once as a tourist.

The 33-year-old owner of a small trading firm is one of thousands of Chinese who are beginning to export China’s house price inflation abroad by piling into property markets overseas.

Stifled by a clampdown on property speculation at home, cash-rich Chinese are buying up homes in Australia, the United States, Britain and Canada instead, countries popular with Chinese students studying abroad.

“Australia allows higher leverage and its legal system is better,” said Sun, who plans on migrating to Australia to live in one of her newly-bought homes and rent out the other two.

Property developers are courting the international rise of the wealthy Chinese home buyer with ardour, marketing their projects in Shanghai and Beijing.

CB Richard Ellis has set up a special arm to help Asian buyers purchase homes abroad. China’s biggest real estate website, Soufun Holdings , has been bringing Chinese investors to tour Western cities in the past two years.

“The Chinese are my most important clients now,” said Cindy Chan, chairman of AGC Property Centre Pty Ltd, Sun’s property agent in Australia. “The number is growing very fast.”

Business is so good that Chan visits China every other month to showcase homes on sale in Australia. She plans to start an office in Shanghai in May.

But while Chinese buyers, or any buyers for that matter, may be welcome in severely depressed property markets such as those in the United States, the UK or parts of Europe, the inflows of Chinese money are causing headaches for economies elsewhere which are growing at a much faster clip.

Singapore and Hong Kong, for example, have found it tough to keep a lid on surging home prices amid strong demand from Chinese nationals, despite government efforts to cool the market and stave off destabilising asset bubbles.

Australia clamped down on foreign buying of homes in the country last year in a bid to calm buoyant prices. ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FACTBOX-China’s property policy changes [ID:nL3E7FC0NB] BREAKINGVIEWS-A guide to China property [ID: nN31149752] Singapore home prices up on China demand [ID: nL3E7EU14V] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^

CAPITAL CONTROLS

Yet, Chan and other property agents could be a lot busier if not for China’s strict capital controls.

Chinese citizens are barred from buying more than $50,000 worth of foreign currencies a year, restricting them to smaller property purchases when they venture abroad.

There is talk that the cap may be raised to $200,000, but that is just unconfirmed chatter so far.

“The government worries about whether Chinese investors have a good understanding about foreign real estate markets,” said Li Wei, an economist at Standard Chartered in Shanghai.

To beat the rules, Sun, like many other Chinese, turned to her relatives for help. They pooled their annual quotas together to give her enough foreign currency to put a downpayment on the three houses, which were worth a total A$3 million ($3.1 million).

Others sneak their money out of China by disguising the funds as import bills.

Such cracks in China’s capital controls will help feed demand for houses elsewhere.

“We think that in a relatively short period of time and in a way that is measurable, Chinese buyers are going to account for something on the order of 10-20 percent of the London market,” said Gerald Allison, a director at global real estate agency DTZ in London.

So far, there is no official nor private estimate on the total amount of Chinese outbound real estate investment.

Some developers hope China will relax its capital controls over time, albeit in its characteristic “gently gently” manner.

After all, China needs to slow the rapid build-up of its foreign exchange reserves, which at $2.85 trillion is the world’s largest and a headache for the country. Freeing up Chinese investment overseas can do just that.

COMPANIES PRUDENT

In contrast to individual Chinese investors, Chinese firms are more cautious about moving abroad.

Although some developers including SOHO CHINA have eyed foreign markets over the last two years, they have yet to announce any deals.

“It takes time for Chinese companies to understand the rules of the game abroad,” said David Chen, a Shanghai-based executive director of CB Richard Ellis for China residential sector.

He said Chinese developers would most likely start from small deals and team up with foreign firms.

China insurers such as China Life and Ping An Insurance are waiting in the wings as well.

Beijing allows insurers to invest 10 percent of their total assets — 5.2 trillion yuan at the end of February — in commercial real estate markets, at home and abroad.

On the whole, however, insurers can only park 15 percent of their total assets outside China.

“They are actively watching (to invest in real estate market abroad) to diversify their investment portfolios, but haven’t reached any deals yet,” said CBRE’s Chen.

$1 = 0.958 Australian Dollars Additional reporting by Xiaoyi Shao in Beijing, Karen Foster in London and Eriko Amaha in Sydney; Editing by Ken Wills

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