Author: Buy2Greece

With so much money flying into overseas real estate markets, it begs the question: Who are these Chinese investors and why are they so eager to get their funds off the mainland?

Chinese buyers are setting records in overseas property purchases across the globe. According to Juwai, a leading international broker specialising in Chinese investors, they spent an eye-watering USD 52 billion on foreign property in 2015, up from USD 10 billion just three years ago. Knight Frank’s USD 30 billion estimate is certainly more conservative but one thing is for sure: the spending spree has been epic.

Between 2010 and 2015, Chinese buyers ploughed more than USD 98.1 billion into U.S. residential real estate and another USD 17.1 billion into commercial property, half of which was spent in 2015 – further increases are expected this year. The main benefactors, however, are a handful of cities and the country’s investor visa programme (EB-5).

EB-5: America’s institutions stress-test China’s favourite investor visa

A 70% share of these investments flowed hard and fast into New York, Los Angeles and San Francisco and the EB-5 programme has generated USD 11 billion from Chinese over the last 25 years. In other words, this nation is responsible for 70% of all funds to ever enter the scheme as well as the creation of 200,000 American jobs. Furthermore, the total investment volume for American commercial property could top USD 58 billion by 2020 according to the Asia Group. Chinese investors are clearly too eager to get their funds off the mainland with very good reason.

Some basic economics

Some structural economic changes, both good and bad, are forcing capital out of China. Analysts believe these are long-term changes, meaning that the money flood will continue. China’s economy has significantly slowed after years of stable double-digit growth. In 2015, it only grew by 6.9%, which is the lowest growth rate of the last 25 years. In fact, the economy expanded by just 1.1% in Q1 2016 year-on-year according to data from the National Bureau of Statistics.

Specifically, it is the yuan (RMB) devaluation that has distinguished itself as one of the biggest drivers behind the current capital outflow. During the period from August 2015 to May 2016, the national currency lost nearly 5% against the dollar and the future is still far from secure, so affluent Chinese are still actively seeking out foreign economies as safe havens for their capital.

Volatility on the Shanghai Stock Exchange (SSE) reflects the economic turmoil and the instability is encouraging stakeholders to find more reliable assets elsewhere.

These macroeconomic events are worsened by the country’s high rates of air pollution and other environmental problems as well as the constant threat of political repercussions from the government. For high net worth individuals (HNWIs) in China, countries like America, the UK and Australia are also attractive because of their renowned education systems and high living standards.

New regulations on capital outflow

Throughout China’s recent history, strict rules have regulated foreign investments but in November 2014, the government significantly loosened financial restrictions to stimulate its sluggish economy. In particular, they made it easier for citizens to buy assets abroad.  The legislative easing applied to both individual and institutional investors, like insurance companies, in order to encourage better integration of the national financial system into the global one. By doing so, the yuan started to be used more around the world, which in turn, stimulated overseas real estate purchases.

Since 2012, insurance companies are permitted to have up to 15% of their assets tied up abroad, while individuals have a right to move out USD 50,000 overseas annually. However, the rules have been largely ignored and the system is notoriously “leaky” with money exiting the mainland into places like Hong Kong and Macau. In response, Chinese officials recently announced that they will step up vigilance over illegal capital outflows into insurance products in Hong Kong.

Mega-rich in the Middle Kingdom

China has the biggest population on Earth (1.38 billion) and has been enjoying a couple of very successful decades. So, naturally, it became home to one of the largest populations of HNWIs in the world. The latter are defined as individuals with over USD 1 million in financial assets.

According to a Hurun Research Institute report, in 2015 China had the biggest population of billionaires, beating the U.S. The country now is home to 568 billionaires compared to 535 in America. Even though this Beijing-based research clashes with Forbes findings (only 335 Chinese billionaires in 2016), the trend is clear: the Middle Kingdom’s ultra-rich population has risen sharply over recent years, growing by as much as 80% since 2013.

Real estate is by far the biggest producer of billionaires in the Middle Kingdom (20.6%), followed by manufacturing (16.5%) and technology (12%), meaning that these investors have a good and often professional understanding of the market.

China also had just less than 1.1 million people with assets exceeding RMB 10 million (about USD 1.5 million) in 2013. By 2016, their population had grown to over 1.2 million. The millionaires fall into four categories: private business owners, professional stock market investors, real estate investors and highly paid top managers.

What are their investment aims?

According to Juwai.com, there are four drivers behind their eagerness to own property abroad: investment and education, followed by lifestyle (including environmental concerns) and emigration. The National Association of Realtors (NAR) in the U.S. echoes these findings. As many as 30% of China’s millionaires prefer sending their children abroad to get educated so as to have better opportunities when they are adults. Furthermore, a Goldman Sachs report also highlights the crackdown on corruption as one of the strong drivers of capital outflow and emigration.

Top five countries for Chinese investments are all English speaking

The situation is also encouraged by local laws: the Chinese state has full rights to land leased to individuals or businesses, with the maximal term of 70 years. By doing so, investors have no guarantees that they can hold onto the land after the leasehold expires. Unlike China, developed countries hand over land for keeps and provide attractive returns on capital invested compared to low yields on the Chinese market, which is oversupplied in all real estate segments.

What next for Chinese investors?

Chinese citizens are likely to stay the largest and fastest-growing group of international property buyers. The report published by Asia Society and Rosen Consulting Group forecasts overseas real estate investments to reach USD 218 billion between 2015 and 2020. However, as countries modify investment visa schemes (the EB-5 is under fire in the U.S.) and popular property markets heat up, buying patterns will likely evolve. As per a recent Cushman & Wakefield report: “Reflecting their desire to grow holdings we see investment spreading to a broader range of geographies and assets as well as increased development.”

Some interesting facts 

More than half of Chinese millionaires’ money and 66% of billionaires’ is invested in property.

China’s rich and mega-rich are 38 to 40 years old on average, health-conscious and obsessed with protecting their assets.

Two hearings took place on Capitol Hill to address the increasingly long lines and security issues currently facing U.S. airports.

Transportation Security Administration (TSA) Administrator Peter Neffenger testified before the House Committee on Homeland Security on his plans to deal with the challenges at TSA. The House Homeland Security Committee’s Transportation Security subcommittee heard from local officials serving on the front lines at airports, airlines and aviation executives on the frustratingly long security lines.

Michael W. McCormick, Executive Director and COO of the Global Business Travel Association (GBTA) – the voice of the business travel industry – issued the following statement in which he called on TSA, Congress and the industry to work together in a collective effort to fix the current state of airport security, ensuring safe and efficient air travel:

“For several months, GBTA has been warning its members of tighter airport security and increasingly long security lines that would not necessarily bring added security. The devastation we saw in Brussels underscores the fact that forcing people to queue up in long lines to go through security could actually be setting up soft targets for terrorists.

But we are far beyond the time for finger pointing. Congress, the TSA, the travel industry and travelers themselves must come together as we embark on the busy summer travel season.

It is well known that TSA is understaffed. But the agency must do a better job of utilizing the staff available and to better manage its resources. Local TSA officials need the flexibility and agility to manage security lines hour by hour. And TSA headquarters needs to ensure the officers on the ground have the intelligence and planning abilities to address security threats.

For their part, airports and airlines deserve credit for taking proactive steps to manage queues and for hiring contractors to help assist TSA personnel with non-screening functions.

Finally, travelers must be cognizant of the strain on the system and do everything in their power to help move travel along. Every frequent traveler must enroll in PreCheck.

As we work through the immediate crisis, TSA must begin to develop long-term solutions. GBTA strongly believes in risk-based programs and supports ways to expand enrollment in TSA’s PreCheck program. The House and Senate have both embraced this plan, but the different vehicles for passage are being held up. GBTA has called on Congress to include this language in the FAA Reauthorization and to pass it without further delay.

TSA, Congress and the air travel industry must address this as an all-hands-on-deck response as we all need to share the responsibility of supporting the efforts necessary to protect one of our nation’s most valued assets: safe and secure air travel.”

Two hearings took place on Capitol Hill to address the increasingly long lines and security issues currently facing U.S. airports.

Transportation Security Administration (TSA) Administrator Peter Neffenger testified before the House Committee on Homeland Security on his plans to deal with the challenges at TSA. The House Homeland Security Committee’s Transportation Security subcommittee heard from local officials serving on the front lines at airports, airlines and aviation executives on the frustratingly long security lines.

Michael W. McCormick, Executive Director and COO of the Global Business Travel Association (GBTA) – the voice of the business travel industry – issued the following statement in which he called on TSA, Congress and the industry to work together in a collective effort to fix the current state of airport security, ensuring safe and efficient air travel:

“For several months, GBTA has been warning its members of tighter airport security and increasingly long security lines that would not necessarily bring added security. The devastation we saw in Brussels underscores the fact that forcing people to queue up in long lines to go through security could actually be setting up soft targets for terrorists.

But we are far beyond the time for finger pointing. Congress, the TSA, the travel industry and travelers themselves must come together as we embark on the busy summer travel season.

It is well known that TSA is understaffed. But the agency must do a better job of utilizing the staff available and to better manage its resources. Local TSA officials need the flexibility and agility to manage security lines hour by hour. And TSA headquarters needs to ensure the officers on the ground have the intelligence and planning abilities to address security threats.

For their part, airports and airlines deserve credit for taking proactive steps to manage queues and for hiring contractors to help assist TSA personnel with non-screening functions.

Finally, travelers must be cognizant of the strain on the system and do everything in their power to help move travel along. Every frequent traveler must enroll in PreCheck.

As we work through the immediate crisis, TSA must begin to develop long-term solutions. GBTA strongly believes in risk-based programs and supports ways to expand enrollment in TSA’s PreCheck program. The House and Senate have both embraced this plan, but the different vehicles for passage are being held up. GBTA has called on Congress to include this language in the FAA Reauthorization and to pass it without further delay.

TSA, Congress and the air travel industry must address this as an all-hands-on-deck response as we all need to share the responsibility of supporting the efforts necessary to protect one of our nation’s most valued assets: safe and secure air travel.”

The US issued a travel alert over the possibility of attacks in Europe this summer causing ripples in the travel sector and the plunging of European tourism-related shares.
The travel and leisure sector fell 1.5 per cent, among top sectoral fallers.
In the warning, the US specified that major events, tourist sites, restaurants, commercial centers and transportation could all be targeted.
The already battered French tourism industry had to face another downfall with the fall in shares of French tourism stocks.
“The expectation is that we will see a bit of a difficult summer, and the backdrop of that perception of an increased risk of attacks is certainly not helping,” Chris Beauchamp, market analyst at IG, said.

Ryanair, Europe’s favourite airline, today (2 Jun) cut its checked-in bag fees for 92% of its 116m customers, and simplified the number of bag fee options (from 108 to 6), as part of Year 3 of its “Always Getting Better” (AGB) programme, which continues to improve the customer experience, through service, digital and inflight developments.

From today, customers on domestic flights under 2 hours will have their bag fees cut by 50%, while customers on all other flights under 3 hours will enjoy savings of up to 17%. Customers on flights over 3 hours will see no change to their checked bag fees.

		15kg Bag	20kg Bag
Flight	% Customers	Was            Now       Saving	Was           Now        Saving
Dom. Flights < 2hrs	18%	£30             £15        50%	£40            £25         38%
Flights < 3hrs	74%	£30             £25        17%	£40            £35         13%
Flights > 3hrs	8%	£40             £40         N/A	£50            £50         N/A

 

Ryanair’s Chief Marketing Officer, Kenny Jacobs said:

“We’re pleased to cut bag fees for 92% of customers as part of our “Always Getting Better” programme with a streamlined range of just 6 bag fee options, as we continue to listen to our customers and improve the Ryanair experience for the 116m people we’ll carry this year.

Over 92% of our customers will enjoy reduced bag fees and will pay the same price for checking-in a bag whether bought at the time of the initial booking or added to the booking, regardless of seasonality. Furthermore, customers will also be able to add bags to their bookings via the Ryanair app up to 3 hours before their scheduled time of departure.

These bag changes are in addition to our best-in-class cabin bag allowance, offering 2 free carry-on bags, and we’ll continue to offer the biggest and best choice of destinations, with the most on-time flights and a fantastic onboard experience, as we grow our fleet, traffic and routes – and all on the lowest fares.”

 

At the opening of the International Aerospace Exhibition (ILA) in Berlin on 31 May, Lufthansa was honoured with the innovation award from the German Aviation Industry in the category of emissions reduction. The innovation award is presented under the patronage of the German Federal Ministry of Economy and Energy (BMWi) and is aimed at companies, start-ups and individuals who have facilitated innovations in the field of civil aviation.

The award recognises the newly developed analysis software OMEGA, which was developed together with the IT company Aviaso. The name stands for ‘Ops Monitor and Efficiency Gap Analyzer’. The IT programme uses data collected from flight operations to improve the efficiency of future flights. Amongst other things, weather, flight performance and navigation data are evaluated. After around three years of its project phase, it was successfully put into regular operation at the end of 2015.

The new software programme provides important data by comparing the planned, actual and optimum values during the different phases of flight in order to reduce fuel and CO2 emissions. “We have taken a great step forward with project OMEGA: Now we can evaluate the experience gained from thousands of daily flights worldwide. And with it, we can optimise flight planning and therefore save several thousand tonnes of kerosene per year. This is a significant contribution to the improvement of the ecological balance”, says Dr. Joachim Schneider, Vice President of Flight Operations Standards & Projects, Deutsche Lufthansa. Pilots can take advantage of the analyses carried out in order to optimally prepare during the flight and for its arrival destination, and also use it to detect any possible deviations from the plan at an early stage.

In 2008, the Lufthansa Group published their strategic environmental programme. Since then, the Group has managed to improve the fuel efficiency of the passenger fleet by 11.5 percent to 3.84 litres per passenger and 100 kilometres in 2015.