Property ownership is, perhaps, the most ancient expression of wealth. Throughout history it has provoked conflict and inspired grandeur, from civic monuments and sacred spaces to egotistical towers and pleasure palaces. Today, the relationship between property and wealth is more complex and more commercial than ever before. Since the global economic crisis of 2008, real estate has attracted many of the world’s rich who have sought a safe haven, and a means of diversifying assets, and a very visual symbol of power and sophistication.
As the world is a decidedly unstable place these days. rich people are rushing to buy passports in search of safe places to shelter their families and their wealth. Many countries offer so-called golden visa which grant residence permits, and, in some cases citizenship in exchange for sizeable investments. These programmes are luring growing numbers of nationals from the Middle East, the Far East (mostly China) and Russia, and demand is expecting to increase as political instability drives rich individuals to weak economic and geographical safety. Many analysts claim that demand is growing as much as 15% per year. The threat of ISIS in the Middle East along with international sanctions in Russia is expected to continue to fuel interest. Investors are lured by the promise of visa-free travel, plus access to education and services.
Chinese nationals, for example, are buying property internationally in unprecedented numbers and despite media speculation that the economy in China is slowing, there is no sign ahead of a slowdown in foreign property investment. On the contrary, overseas property purchases by Chinese nationals are expected to increase to more than 10,000 properties in total in 2015.
These Chinese overseas investors are divided into three waves: the first, those buying homes in countries where they have business interests; the second, those buying for their offspring or to secure permanent residency; and a predicted third wave looking to buy property in an ever wider range of locations. For Cyprus, it is certainly worth considering the huge potential for growth in the Chinese market, and Asian buyers more generally.
These expectations are based on an assumption that the spending power of wealthy Asians will continue to increase, and that the tastes of these buyers will broaden as their wealth matures. Newly wealthy in mainland China, for example, prioritise security and investment diversification, so they tend to buy second homes in established “global cities”, like London and Paris, before they look at holiday destinations like our island. And in a country (China) where rural dwellings are still associated with poverty, and a taste of sunbathing and winter sports is yet to flourish, the demand for holiday and leisure locations remains limited.
Funds are also pouring into real estate because it is one of the few investment classes with a decent yield in the global economy’s unprecedented low interest rate environment. Short-term geopolitical and fiscal factors will ensure that capital flight from the world’s less stable regions will continue; while long-term trends, such as education needs, immigration and the reach for safe havens, will be responsible for the most durable demand sources.
Therefore, expect to see Chinese investors in Cyprus, Nigerians in Cape Town, Malaysians in Switzerland, Egyptians in Miami, and almost the whole world in London.
