High risks of overseas investment
On the Internet there are a large number of agencies dealing with the global real estate business. These agencies repeatedly highlight the advantages of making investment in certain overseas property, such as the high rate of return, yet rarely discuss potential risks and problems.
Lu Qilin, research director at Shanghai Deovolente Realty, a Shanghai-based real estate agency, said investment in overseas property holds higher risks than the domestic real estate market, because most overseas property does not have as much room for appreciation, and return on investment is more costly due to commissions and exchange losses.
"The largest risk lies in the exchange rate, which is a main factor that affects the buying behavior of overseas property," said Zhang Yongheng. He suggested that domestic investors should keep a close eye on the exchange rate of the target country.
In addition, some people only compare housing prices. For example, a popular microblogger has listed various houses at the price of 1 million yuan ($154,600) located around the world, among which a five bedroom, three bathroom house in New South Wales of Australia stood out for its value.
However, apart from housing prices, there will also be maintenance, taxes and other fees, including insurance. Management fees should also be considered, because once the owner of a house defaults on property management fees or repayment of a bank loan, he or she will get a poor credit record in the foreign country.
Chinese speculators need to improve image
Though it has become a popular option among affluent Chinese to buy property abroad, investors should attempt to maintain a good image in other countries -- especially since many of them are dominant wealthy investors who buy overseas property without a second thought.
Several months ago, former Vancouver councillor Peter Ladner argued that "Wealthy Chinese homebuyers were driving Vancouver's real estate prices to unaffordable heights" and that "Rich Chinese buyers were making a killing." Ladner also quoted a realtor's flyer boasting that his average client's equity rose from $150,000 to $4.5 million between 1993 and 2011.
Australian residents have expressed similar opinions. "Those who speak Chinese are scary. It seems as if they are going to buy out all the prime houses at good locations in Melbourne," said a local land agent.
Chinese buyers, as foreign competitors, are unnerving some of the locals, even if they are mostly buying overseas property for investment.
But with that growing criticism against Chinese real estate speculators, the cost of overseas property may rise in the future.
