Juwai CEO sees huge growth in Chinese buyers of NZ property

The head of a company that helps Chinese buy properties overseas says NZ is one of the most sought-after targets.

New Zealand is the seventh most popular country in world with potential property buyers in China, says Juwai CEO Simon Henry. 

The Hong Kong-based Mr Henry expects 15-20% growth in property sales worldwide to Chinese buyers in 2015/16.

"The Chinese have only just started to look at the world as an emerging opportunity," he says.

“We think we’re at the very beginning of the Chinese outbound property cycle.”

Chinese international property investment totaled $52 billion globally last year, Mr Henry says, up from $10 billion three years ago.

$1.4m average spend
The average spend of Chinese housing investors is $1.4 million, the CEO says, arguing that at that level they are not competing with first-time domestic home buyers.

Mr Henry's comments come after a week in which Labour leader Andrew Little called for a register of foreign buyers of NZ homes. Currently, the Overseas Investment Office only scrutinises deals above $5 million or involving strategic land; their is little data on how many properies overall are owned by domestic or offshore buyers. A foreign buyer register would lay the ground work for controls on the housing market. Labour, the Greens and NZ First have all called for a ban or tax on foreign home buyers, at least those who want to buy existing homes rather than build or open up new developments.

Across the Tasman, Tony Abbott's government is moving to implement a foreign home buyer register and other controls, plus a $1500 fee on foreign buyers — a token amount, but one that could be raised in future.

Finance Minister Bill English has previously called controls on foreign buyers xenophobic, and avoiding the real issue, which he sees as planning permission and increasing supply. He has also questioned whether a foreign buyer register would be practical or yield any more information than is available at present.

However, this week Mr English and Housing Minister Nick Smith watered down their stance somewhat. The government still has no plans to actively pursue controls. But for the first time, it is not ruling them out, either. NBR political editor Rob Hosking senses a cave-in.

Aussie controls push more Chinese buyers to New Zealand?
Juwai's Mr Henry believes Australia’s move to tighten rules around foreign property investment won’t push more investors towards NZ.

He also says it could be beneficial for NZ to introduce a foreign buyers register as it would provide more data and knowledge.

Asked if racism plays a role in the foreign buyer debate, he says, "There's certainly a touch of it. If you look at the net foreign investors into New Zealand, Chinese make up roughly 25%; Australians make up around 20% and UK citizens about 11%. So the Chinese are roughly a quarter of the foreign investment into real estate. So that means you do have 75% of other nations who are actively investing a lot more than the Chinese."

READ ALSO: Winston Peters reacts to Juwai CEO

RAW DATA: TV3/The Nation transcript - Lisa Owen interviews Juwai CEO Simon Henry

Lisa Owen: And one thing that has caused plenty of discussion this year is non-residents buying New Zealand real estate. As house prices surge again, National's coming under renewed pressure to act. In Australia this week, an Australian parliamentary report suggested adding to its existing restrictions by introducing fees and a register of foreign buyers. So what do those foreign buyers make of all this? Juwai markets itself as the company Chinese go to to find international property. It has 2.4 million listings from 58 countries. Its co-CEO is Simon Henry. I spoke to him from Hong Kong yesterday and began by asking how popular New Zealand is with Chinese buyers.

Simon Henry: New Zealand is one of the top 10 countries which is searched on our platform. We reach Chinese consumers and have interests in properties in around 60 countries around the world. So I think New Zealand is currently number seven.

So why? Why do they like us?

A lot of it has to do with proximity. Australia is the second most popular country in the world for the Chinese buyers. New Zealand, as I said, is number seven. It's a similar time zone. It's only about eight or nine hours' travel down from China to Australia or New Zealand. And if you're sending your kids overseas to study, it's only a two- or three-hour time difference in terms of telephone calls and contact. New Zealand's also got a fantastic reputation in terms of produce, education, lifestyle and tourism. And so New Zealand has a very good brand reputation.

So what exactly are they looking for in housing? What do they want?

Generally, Chinese consumers when they're looking to invest in property internationally, they're looking to fill one of four major buyer motivations. The first is investment in property overseas. It's become increasingly difficult to buy a second or third property in China, and so looking at investment opportunities overseas is a big driver. The second is education. A lot of Chinese will send their kids to study overseas, and as part of their study, they'll purchase a property for them to live in while they're studying. The third is lifestyle, so this is the trophy homes and the penthouses and the mansions. And the fourth is for immigration.

So, how much are they spending?

Typically, the average spend of a Chinese investor is about NZ$1.4 million, so roughly about double what a first-home buyer or a domestic buyer would purchase.

So how big do you actually see that demand getting over time? If we're popular now, is it just going to keep growing?

Yeah, we think we're at the very beginning of the Chinese outbound property cycle. We saw rather large growth over the last three years. Three years ago, it was probably $10 billion globally. Last year it was approximately $52 billion globally. We're seeing a net increase of roughly 15% to 20% per year, expected for 2015, 2016.

So this is just, really, the start of it, then?

Very much so. I mean, the Chinese have only just started to look at the world as an emerging opportunity, and we're starting to see investment by Chinese into international markets. And it's not just money from China. It's also money from Chinese communities around the world. We see a lot of investment in New Zealand coming from Singapore, Hong Kong.

What's actually pushing that growth, then, that increase in demand?

There's a— There's a couple of things. One, the Chinese are becoming wealthy. You're seeing this more and more across the board. You have Chinese who have become wealthy through mining, through manufacturing. And the new sector, which is emerging very, very strongly is technology millionaires. And so at the same time you've got China emerging with wealth, they're also sending their children overseas to study a lot more and more frequently. And also you've got the outbound tourism. About 100 million Chinese travelled overseas last year on international holidays, and that's increasing year on year.

So, I'm sure you're aware of the concern that these Chinese foreign buyers are pushing people out of the market here in New Zealand. What's your response to that?

It's very interesting to draw parallels to the recent Parliamentary inquiry which happened in Australia on this exact topic. The findings of the inquiry were that foreign investment, first and foremost, is very good for the domestic economy; it helps create jobs and also it helps create supply. Secondly, it also adds a lot of supply to the domestic marketplace, which would otherwise not be added. And third, they found that it actually keeps prices low, cos without the foreign investment, there wouldn't be new supply, which would actually drive prices even higher.

So what is the issue, really, then? Do you think there's a touch of racism here?

There's certainly a touch of it. If you look at the net foreign investors into New Zealand, Chinese make up roughly 25%; Australians make up around 20% and UK citizens about 11%. So the Chinese are roughly a quarter of the foreign investment into real estate. So that means you do have 75% of other nations who are actively investing a lot more than the Chinese.

Given that Australia looks like it might tighten up the rules — it's going to bring in bigger fines, perhaps, for people breaching rules around selling to foreigners — and it's going to toughen up in that respect, do you think that that could be of benefit to New Zealand? Is it going to drive those Chinese buyers to New Zealand from Australia?

Um, I don't think so. We do live in a very competitive world. Australia currently has the second most strict foreign investment rules in the world, in the OECD environment, right after Switzerland. If you look at other nations such as the United States and some countries in Europe, the UK, there's no restriction on foreign investors. So most countries do compete for foreign investment. So I don't think Australia tightening the rules is going to push people towards New Zealand, and I think the problem about not following the rules is actually a small proportion of the population or transactions.

In New Zealand, we are— there's a lot of debate around whether we should have a foreign buyers' register. What do you think of that idea?

I think it's quite interesting. Any country should understand who is investing in their country. Generally, by global standards, roughly 5% to 10% of the property markets globally are to foreign investors, and I think New Zealand is currently sitting at about 8%, so well within the range. Having more data and more knowledge about what's happening in local industry I don't think would be harmful at all, and it actually could be quite beneficial.

Do you think it could take the heat out of the debate as well if there were some hard fast figures and people weren't just going on their gut feeling or fears?

Yeah, I think having more data is definitely something which is very beneficial. The other thing to consider too is the Chinese population of New Zealand, of Chinese residents, people who have actually become New Zealand citizens, has doubled in the last 10 years. So while people may go to sales and see a Chinese person purchasing a property, it may actually be a Chinese citizen who's of Chinese descent who's actually making the transaction. So I think having the data will give more transparency to what the real market is actually doing.

So lots of growth you think to come for us here in New Zealand with foreign buyers?

Lots of growth and lots of opportunity.

Thank you so much for joining us this morning. That's Simon Henry. 

Watch the interview here.