HOMES FOR THE RICH
Xujiahui Grand Gateway in Shanghai Suburban developments have sprung that cater to the nouveau riche. The Palace de Fortune is a development with 172 small, French-style mock chateaux squeezed on to a 33-hectare plot of land outside Shanghai. Buyers pay an average of $2.6 million for 1,500 square meter shells and pay extra for the interior walls, bathrooms, kitchen and decorations. Spaces have been set aside for swimming pools and three car garages.
In Beijing there are $1 million homes in in gated communities with names like Versailles, Provence, Arcadia, and Riviera and $800,000 luxury apartments in complexes named Central Park and Riverside.
In March 2009, an unknown buyer paid $30 million for a fully-furnished, 4,000-square-meter villa in Shanghai’s Shimao Sheshan development, the most ever paid for a residential property in China. The record on square meter basis in 51,000 yuan per square matter for 130 million luxury apartments in the Tomson Riveria complex in central Shanghai.
An elite villa compound called Shanghai Racquet Club and Apartment found itself at the center of a storm when bloggers published a set of rules that required domestic servants, cleaners and babysitters to vacate their seats on the bus to villa residents and “take up rear bus seats” if the residents wanted their seats.
In recent years rich Chinese have begun buying up chateaus in France such the Chateau Richelieu, formally owned by King Louis XIII’s famous minister. The new owners have plans to market wines from the chateau’s vineyards in China.
Some rich suffered in the economic crisis in 2008 and 2009. Others saw it as an opportunity. In 2008, there were reports of cash-rich Chinese in Hummers and Lincoln Navigators driving around in neighborhoods throughout the United States, and particularly in California, looking for foreclosure signs and snapping up properties at bargain prices. There were even organized property-prospecting tours to places like Los Angeles and Las Vegas, where property markets have been hit particularly hard. Similar stories were told of the Japanese in Hawaii the 1980s.
Some buy property so their kids have places to stay when they study in the United States. Others buy properties as investments, often paying in cash with $1 million or more at their disposal.
80 Percent of China’s Rich Send Children Abroad
According to the Hurun Research Academy, an astonishing 80 percent of China’s upper-class are sending their kids abroad to attend school, the highest rate in the world by far. Ten percent of Germany’s rich send their children away for school, while only five percent of the French upper-class do the same. In Japan, this figure stands at one percent. [Source: Charles Liu, The Nanfang Insider, November 25, 2014]
Hurun said in its report that millionaires usually send their kids abroad at 18, while multi-millionaires do it when they are 16. The top choice for an overseas education is the U.S., followed by Australia, Canada, Switzerland, New Zealand, Singapore, France, Japan, and Germany.
Many Rich Chinese Want to Emigrate
A survey released by the Hurun Report in January 2014 found that 64 percent of rich Chinese want to emigrate, up from 60 percent in 2013. This finding was echoed by survey released in April 2011 by China Merchants Bank and Bain & Co showeding that almost 60 percent of wealthy Chinese were considering emigrating, had begun taking steps to do so or had emigrated already. The U.S. is the destination of choice, followed by Europe and Canada. Chinese investors are also buying up homes abroad. The Guardian reported that demand from Chinese buyers has helped drive prices of British country estates and farmland to a record high of $11,400 an acre. [Source: Washington Post, Julie Makinen, Los Angeles Times, January 28, 2014]
Barbara Demick wrote in the Los Angeles Times, “At 49, Wang Zeqiang has achieved the Chinese equivalent of the American dream. Raised in the cornfields of eastern China's Shandong province, he founded an auto parts business that today has several dozen employees. He has two houses, two cars and, because he's rich enough to pay the fines for defying the country's family planning policy, two children. Now, all that is missing — what he covets most — is a foreign passport. "In China, there is so much pressure," said Wang, who recently hired a consulting firm to advise him on his first choice, Australia. He hasn't been there yet, but he's been surfing the Internet and likes what he sees: blue skies, open spaces. "I want to live a relaxed, happy life." [Source: Barbara Demick, Los Angeles Times, November 2, 2012 ++]
“The new Chinese emigres have little in common with earlier waves of unskilled laborers or political exiles. They're not going abroad for economic opportunity — they're already wildly successful — or political activism, but for a quality of life that money can't buy in China. A recent poll of Chinese with a net worth of more than 10 million yuan ($1.6 million) found that 16 percent had obtained foreign residency and that an additional 44 percent were planning to emigrate. Many cite a polluted atmosphere, and not just in the air they breathe: endemic corruption, a shaky political system, tainted products and poor medical care, among other problems. The exodus of the middle and upper classes is an embarrassment to the government, with possibly serious economic implications because the emigres are taking with them money and skills. In an attempt to prevent capital flight, Chinese laws limit people from taking more than $50,000 a year out of the country, but it is easy enough to get around the restrictions. ++
“In effect, the wealthy emigres are buying their new residencies, in what they hope is the first step toward new passports. Many of the foreign programs involve a substantial investment by the prospective expatriates, either in real estate or businesses. The recently renewed U.S. EB-5 visa” (see Below). “Dozens of consulting firms with names such as Royal Way Ahead Exit and Entry Service Co. have sprung up in recent years, their websites beckoning with photographs of swimming pools and world landmarks, with the Statue of Liberty and Sydney Opera House being among the most popular. Prospective immigrants troll the Internet, browsing real estate listings and schools, examining rankings of the "World's Most Livable Places." ++
Reasons Chinese Rich Want Emigrate
Barbara Demick wrote in the Los Angeles Times, “To a large extent, the flight reflects pessimism about China's future. The spectacular downfall this year of Politburo member Bo Xilai and his cronies, including many businessmen still in jail, proved that shifting political winds can put anybody in jeopardy, and highlighted the instability of the system. More immediate, there is the competition for spots in good universities, for housing, for space, for land. "Scarcity is a very compelling reason," said Leon Zhong, president of Xinhaowei Consulting, one of the largest companies advising prospective migrants, gesturing out the oversize windows of his 30th-floor corner office at the pea soup obscuring what would otherwise be a stunning view of the Beijing skyline. "And to be frank, the environmental hazard is a factor: the air, the poisoned foods." [Source: Barbara Demick, Los Angeles Times, November 2, 2012 ++]
“Zhong, who has been in the emigration business since 1995, says that each of the hundreds of families he's helped have its own reasons. "At some point something will happen, and they say to themselves, 'I have to go now.'" Zhong decided he would retire in Australia after a health scare a few years back, when he discovered how difficult it is to get an appointment with a specialist at the top Beijing hospitals. "I had to send an assistant at 4 a.m. to stand in line so I could get in," said Zhong, who has an Australian passport, having studied business in Melbourne in the 1980s, and travels frequently back and forth. "In Melbourne, I just telephone the doctor and get an appointment." ++
“Wang, the Shandong businessman, said the deciding factor for him has been corruption in the business world. "I have to give out gifts, cash, gift certificates. If I don't give, business won't happen. I'm tired of that." Tony Du, 33, a consultant at Xinhaowei, says he, like most of his clients, worries most about education. He has secured permanent residency in Canada, thanks to having studied in Paris and speaking fluent French, a prerequisite for a program sponsored by Quebec province. "My daughter is only 1 1/2 now, but in five or six years we will move for her education," Du said.” ++
“At Xinhaowei Consulting, the typical client is older, often somebody who has made money in real estate or pharmaceuticals or has taken a company public. The applicant must show how the money was earned; in short, corrupt government officials need not apply. (The company also steers clear of programs that send pregnant women to the United States to give birth in order to obtain citizenship for their children.) The most important qualification, Du said, is to be rich: "You need to have that $500,000 in cash." Du said most of the clients investing in the United States send their spouses and children ahead of them, remaining in China themselves. Why? To make more money, of course. "China's economic development is still strong," Du said. "It's the best place to make money, but just not to live." ++
Destinations Rich Chinese Emigrants
The U.S. EB-5 visa requires $1 million ($500,000 for poor or rural areas) in businesses that create at least 10 jobs. Barbara Demick wrote in the Los Angeles Times, “For the rich Chinese craving an American lifestyle, the way to go is the EB-5 visa. In September 2012, the program was extended for three years. In fiscal 2011, Chinese made up three-quarters of the applicants. The successful applicants don't need to speak English or have particular business expertise, just the cash. Consulting firms in China put together investment vehicles.” "The United States is still everybody's dream, but they worry about crime," Zhong, told the Los Angeles Times, "All in all, though, the people who want business opportunities prefer the United States. The young professionals prefer Australia." [Source: Barbara Demick, Los Angeles Times, November 2, 2012 ++]
"I like agricultural projects, manufacturing. Real estate and hotels used to be popular, but they're too risky," Du told the Los Angeles Times. The big disadvantage of the U.S. program from the standpoint of Chinese investors, said Du, is that their immigration status is contingent on the business succeeding. "If the business fails, you lose your green card too." ++
Demick wrote: “Doors open and close. A Canadian program that was wildly popular is no longer accepting applicants, but Australia is still taking in rich Chinese by the thousands for ever larger sums of money. The newest program offers residency for the purchase of $5.2 million in treasury bonds. Last year, Chinese surpassed Britons as Australia's largest source of permanent migrants, with 29,547 arriving. "The number of people is growing," said Ivy Wang, a breathless real estate broker in Melbourne selling suburban homes at an average price of $600,000 to Chinese newbies. "Australia is pretty easy: There is not much living pressure and the workload isn't too heavy, not like in China." ++
Wealthy Chinese Buy Up U.S. Houses
E. Scott Reckard and Andrew Khouri wrote in the Los Angeles Times, “Chinese buyers bought 12 percent of all U.S. homes purchased by foreign citizens last year, up from 5 percent in 2007, according to the National Assn. of Realtors. More than half their home purchases were in California. And more than two-thirds of them paid cash, the trade group said. The trend appears unlikely to unwind soon. More than 60 percent of China's wealthy have left or plan to leave the country, at least part time, and their No. 1 destination is the United States, according to the Hurun Report, a Shanghai publishing firm focused on recently minted millionaires and billionaires. [Source: E. Scott Reckard and Andrew Khouri, Los Angeles Times, March 24, 2014 ***]
“Despite dizzying ups and downs in U.S. home prices, the market can seem more stable than in China, where fears of a property bubble have added to the economic and political worries of the burgeoning middle and upper classes. Unwary buyers accustomed to urban China's $1-million-plus luxury flats take "housing tours" and snap up homes east of Riverside or in Arizona without considering the cost of property taxes (China has none) or maintenance of homes with pools and yards. "They look at the dinky little apartment in Shanghai or Beijing — you know, like one-fifth the size — and they say this is affordable," said Ng, who fears prices will appreciate less than the buyers expect. "They are buying for speculative purposes." ***
“William Chen, a 25-year veteran of the mortgage business, opened an office three years ago inside the San Gabriel Hilton, where Chinese-language magazines near the front desk advertise local homes for sale, alongside pamphlets for theme parks. A flier for his Home Loan Mortgage Co., also in Chinese, promises to help foreign buyers find their "dream home." Most guests of the hotel, he said, are there to scout real estate investments. And the hotel, Chen said, is "very busy." ***
Wealthy Chinese Boost L.A. Housing Markets
E. Scott Reckard and Andrew Khouri wrote in the Los Angeles Times, “Affluent Chinese home buyers are driving prices past boom-era peaks, spawning a subset of property brokers and mortgage lenders that cater to their distinct needs — and even dictate design details in new subdivisions. The strongest magnet is the San Gabriel Valley, where Monterey Park became known as the "first suburban Chinatown" in the 1970s. Selling real estate there now requires familiarity with feng shui, the ancient Chinese principles of harmonious design. "People are getting money out of mainland China and sticking it here," said Mel Wong, president of the West San Gabriel Valley Assn. of Realtors. [Source: E. Scott Reckard and Andrew Khouri, Los Angeles Times, March 24, 2014 ***]
“The trend has spilled over into other areas, including San Bernardino and Orange counties and even Las Vegas, with more acculturated Chinese Americans seeking homes big enough to host lengthy visits from overseas relatives. Motivations vary by location. Luxury estates in San Marino are bargains by Chinese standards; inexpensive Inland Empire homes are purchased as investments; top-shelf schools draw throngs to Irvine. ***
“Eva Chen and her husband travel between their homes in Shanghai and Arcadia, where they purchased a property near Santa Anita Park in October. They scooped up the second home as an escape from pollution and a shot at better schools for their two infants. Compared with housing prices in China, the $1.27-million Arcadia property didn't seem expensive. "The Arcadia house is cheaper," Chen said. But it's getting more expensive quickly. Heavy demand pushed the median home sales price past $1.32 million last quarter in Arcadia's 91007 ZIP Code — 30.5 percent above its peak in 2007, during the housing bubble, according to researcher DataQuick. ***
“Next door in the 91006 ZIP Code, prices are up 23.7 percent. Other areas with prices exceeding their peaks include Walnut, Temple City, San Marino and parts of San Gabriel and East San Gabriel, all hubs for Chinese investment. The Chinese buying spree sometimes borders on recklessness, said Dominic Ng, chairman of Pasadena's East West Bank, the largest Chinese-American bank. East West specializes in home loans for Chinese buyers with no U.S. credit histories, but often enormous down payments.” ***
Some “want the prestige of a San Marino or Pasadena mansion, even if paying for it means working in China and rarely visiting. One of Ng's neighbors bought a Pasadena estate, then lived there for just two days out of the two years that followed. "He was not renting it out," Ng said. "People have so much money, they just say, 'What the heck. It's a nice neighborhood. I might as well just buy one.'" It's a story echoed by Patti Hahn of Arcadia, gesturing to the house next door, which sold for $2.45 million last year, up from $1.55 million in 2006, the last time it changed hands. "No one lives there," Hahn said. The buyers pay for twice-weekly maintenance work, she said. They live overseas but plan to start splitting time between the U.S. and China this year, said Johnny Lam, the buyers' agent. ***
U.S. Houses Built with Chinese Buyers in Mind
E. Scott Reckard and Andrew Khouri wrote in the Los Angeles Times, “Home builders have taken note of the surging interest from Chinese buyers, as well as Chinese Americans who have lived in the U.S. for years but still favor neighborhoods and amenities that reflect their native culture. At Lambert Ranch — an Irvine development of $1-million-and-up homes that quickly sold out last year — Chinese benches and figurines decorated the downstairs of model homes. At one model, would-be buyers climbed stairs decorated with large photos of the Great Wall and a Chinese farmer cradling a basket of rice. [Source: E. Scott Reckard and Andrew Khouri, Los Angeles Times, March 24, 2014 ***]
“Downstairs, the New Home Co. houses were designed with separate master bedrooms and baths that sales staffers said were intended for relatives from foreign countries. The most expensive homes have detached studio apartments for visitors. Builder Lennar Corp. took a similar strategy. It had initially created a home design in response to job losses from the recession — a small apartment, built within a house, so extended families could live together. But it has since modified the plans to accommodate the tastes of Asian families, who also often live with elder relatives. ***
“The Lennar home that Tom and Rebecca Chow bought last year in Chino's College Park area has not only this "home within a home" design, but also a second "wok" kitchen designed to accommodate Chinese cooking. The range has a 50,000 British thermal unit double burner for high-temperature recipes, a high-powered exhaust fan to carry off the smoke, and walls covered in white tile for easy cleanup of spatters. ***
“The home is aligned to avoid feng shui miscues: You can't see the back door or a staircase from the front door, both of which are thought to create imbalance. Lennar sales representative Michael Lua also noted that the sink and refrigerator in the main kitchen are not directly across from the oven and range, which would create friction between water and fire elements. The Chows, originally from Hong Kong, came to the U.S. more than two decades ago as students and stayed. They now have a son at a university and a daughter getting ready to go. The apartment enables them to host relatives from Hong Kong, Canada and Saudi Arabia, as well as their own returning children and a college-age niece, Tom Chow said. ***
“In Las Vegas, which has a long-established community of ethnic Chinese residents, as well as the allure of gambling and inexpensive housing, Lennar went a step further when it developed a 40-acre housing tract, Lantern Gardens, on the outskirts of town. In addition to applying feng shui design principles and interior apartments for relatives, Lennar designed a central park that is round instead of square and aligned most of the homes on a north-south axis, reflecting the preferences of many Chinese. "The traffic coming through was principally Asian, and mostly Chinese," said Jeremy Parness, the company's division president for the area. The company has even taken care to avoid putting the number four in any address, because it rhymes with the Chinese word for death, Parness said. ***
Chinese Nouveau Riche Buy Up Property in Australia
A. Odysseus Patrick wrote in the Washington Post, ““Credit Suisse estimates that 18 percent of all new houses and apartments in Sydney are bought by Chinese citizens. In Melbourne, the figure is 14 percent. These figures are likely to rise. To stimulate the economy, the Australian government recently expanded a program to grant permanent residency to foreigners prepared to invest at least 5 million Australian dollars (about $4.6 million) in Australian businesses. Ninety percent of the applicants so far are Chinese. <*> [Source: A. Odysseus Patrick, Washington Post, June 17, 2014 <*>]
“Australia relies on China to buy much of its two main exports, coal and iron ore. But many say there’s a downside to Chinese investment: surging property prices. Concerns that Chinese buyers could be driving a property bubble are so widespread that the Australian Parliament recently began an investigation into the possibility. Research given to the inquiry by two academics found that people with Chinese surnames paid slightly less than other buyers for similar houses and apartments in Sydney, suggesting they are tough negotiators and aren’t pushing up prices. <*>
“Many Australians aren’t convinced, according to submissions to the inquiry from the public. “Widespread injustice will continue with Australians being outbid by foreigners on an uneven playing field,” a woman named Pat Sutton wrote to the investigators. The concerns reflect a belief among many people that Chinese citizens are using cities such as Sydney — an 111/2-hour flight from Beijing — to protect their wealth from theft or seizure by the Chinese government.” <*>
Politically-Connected Chinese Buy Famed Sydney Property
Reporting from Sydney, A. Odysseus Patrick wrote in the Washington Post, “ From London to midtown Manhattan to Hong Kong’s Victoria Peak, wealthy Chinese — often connected to powerful political figures — are buying up some of the world’s best real estate In recent weeks, wrecking crews have embarked on a job that symbolizes the international economic clout of the Chinese elite: razing an Australian mansion with stunning views of one of the world’s most picturesque harbors. Craig-y-Mor, an elegant 106-year-old home owned over the years by several prominent Sydney businessmen, was bought in 2008 by the son and daughter-in-law of a former senior member of the Chinese Politburo for 32.4 million Australian dollars (about $30 million). [Source: A. Odysseus Patrick, Washington Post, June 17, 2014 <*>]
“The new owners, Zeng Wei and Jiang Mei, sought permission to demolish the two-story brick house and replace it, at a cost of $4.5 million, with a five-level modern concrete structure with huge windows. The plan horrified some neighbors and government officials, who thought the new building would be too big and unattractive. After the municipality refused to allow the demolition, Zeng’s lawyers appealed to a state judge, who overruled that decision. <*>
Zeng and his wife may have had another reason to choose their new home apart from Australia’s strong defense of property rights and the 180-degree views of Sydney Harbor. Feng shui expert Gary Khor recently told the Sydney Morning Herald that Point Piper, the wealthy suburb where Craig-y-Mor is located, contains positive energy because it overlooks calm, moving water and has a hill to its rear. Powerful ties. <*>
“Little is known about Zeng’s personal or professional life. His father is Zeng Qinghong, the vice president of China from 2003 to 2008 and a player in the leadership maneuvering over the past decade that led to the rise of President Xi Jinping. Foreign Policy magazine reported in 2012 that Zeng Wei was involved in the clandestine privatization of the state-owned Luneng power generating company, which had over $9 billion in net assets. <*>
Workers began demolishing the home last month, an event that was front-page news here. “They are knocking down something that was modest and thoughtful and replacing it with something that doesn’t even have a thought in its head,” said Elizabeth Farrelly, Sydney’s most prominent architecture critic, in an interview. Bill Malouf, a veteran real estate agent whose firm brokered the sale of the house, said in an interview that Craig-y-Mor wasn’t in need of renovation. Chinese buyers prefer modern, symmetrical houses lacking the ornate detail common to many of Sydney’s grand older homes, he said. Views of the Sydney’s iconic Opera House and Harbor Bridge are important, he said. “He was always going to do a major renovation,” Malouf said of the buyer. “There was nothing wrong with the house.” <*>
“The construction site at Craig-y-Mor has now turned into a regular stop on the Chinese tourist circuit, along with Bondi Beach and the Harbor Bridge. “We get minivans every day and private cars on weekends,” neighbor Bob Gilman, a California businessman who has lived in China, said in an interview. “A Greyhound bus came one day.” Recently, a vehicle carrying tourists blocked Gilman’s car. His Pennsylvania-born wife, Denise, asked the driver — in Mandarin — to move it, prompting embarrassed tittering from the group. “They all want to have their photos in front of the house that belongs to a famous Chinese official,” she said.” <*>
Chinese Buy Houses in Cyprus to Gain E.U. Access
The real estate market in Cyprus, an EU member, is turning to Chinese investors seeking easier access to Europe. Reporting from Paphos on the island of Cyprus, Caroline-Nelly Perrot of AFP wrote: “Hundreds of Chinese nationals have purchased second homes on the island thanks to a Cypriot law revised last year granting permanent resident status to foreign buyers of homes costing at least 300,000 euros ($390,000). "The Chinese are not interested in houses as such in Cyprus. They are interested only in the permanent residency. They buy houses through visa firms," said leading real estate agent Antonis Loizou. While Cyprus has been a European Union member since 2004, it does not belong to the Schengen passport-free zone, meaning permanent residency does not guarantee free travel across the bloc. But "it is much easier to get a European visa" with Cyprus residency, stressed Wuang Hong, herself a longtime resident and telecoms employee who says she assists Chinese investors. [Source: Caroline-Nelly Perrot, AFP, March 6, 2013 ~~]
“She says most Chinese investors are businessmen who buy on the coast, especially in and around the western resort of Paphos."Some want to give a better future to their children -- give them an opportunity to live in a cleaner environment and go to good international private schools, which are much more expensive in China," she said. But only few Chinese have so far opted to settle in Cyprus, where residency does not grant a work permit. ~~
“The investors, who are banking on a medium-term rise in house prices, have had to come up with methods to skirt Chinese law which in theory limits foreign currency exports to an annual $50,000 per person. Apart from opening up Europe as a destination, Cyprus can provide a political refuge, access to the Cypriot banking sector and a way to circumvent China's one-child policy. But the players in Cyprus, where billboards have sprung up in Mandarin advertising luxury homes, insist money-laundering is not a factor. "All this money has to come through a bank. No one can come with a suitcase full of cash and buy a house. It is all checked out," said Nick Antoniades, who runs a service company for Chinese investors. He said the buyer must show documentation to prove annual income of at least 30,000 euros. ~~
“In Paphos, previously the preserve of British pensioners before the world economic crisis kicked in, the carnival king in the countdown to Greek Orthodox Easter will have Chinese facial traits, adding an Oriental flavour to the event. "For us, it's a question of survival," explained Maximos Pantelides, a real estate agent just back from China. "Prices have gone down by at least a third in the past four years" and several agencies have gone out of business. Other countries, including Spain, are also offering residency in return for home buying, but Cyprus now has "the best immigration policy in Europe," according to Antoniades. And the island could join the Schengen zone. But, cautions Loizou, Cyprus could still, like Malta, toughen up the regulations once a certain quota of foreign investors has been met. "This policy is not forever," he said.
Image Sources: Wikicommons
Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, Chinese government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.
© 2008 Jeffrey Hays
Last updated July 2015