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Lured by better prices, amenities, more Chinese buy homes in West

BEIJING — Palm Beach Central Villas, a 1,000 sq m suburban replica of an American McMansion in Beijing that looks on to a rubbish-strewn wasteland, has been put up for sale. A snip at US$8 million (S$10.5 million) — the same list price as Sandy Cay, a resort island in the Bahamas offering views of white sand and real palms.

Grape vines in Lovedale in Australia’s Hunter Valley region. Prestige properties on display at Beijing’s Luxury Property Showcase include a top-producing winery in

Grape vines in Lovedale in Australia’s Hunter Valley region. Prestige properties on display at Beijing’s Luxury Property Showcase include a top-producing winery in

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BEIJING — Palm Beach Central Villas, a 1,000 sq m suburban replica of an American McMansion in Beijing that looks on to a rubbish-strewn wasteland, has been put up for sale. A snip at US$8 million (S$10.5 million) — the same list price as Sandy Cay, a resort island in the Bahamas offering views of white sand and real palms.

Welcome to the world of Chinese real estate, where a combination of rapid riches and easy credit has fuelled a decade-long boom in local house prices that ended only last year. From a country of almost zero homeownership only 15 years ago, more than 80 per cent of Chinese households now own their own homes.

Yet, the price tags and exotic names often jar horribly with reality. Next to Palm Beach is the Merlin Champagne town, a gated community whose only nearby shopping amenities consist of a rundown mall where the main draw is a McDonald’s outlet.

Worse, ownership of the land under Chinese homes is restricted to a 70-year lease at most, rather than in perpetuity like in other markets. This has helped spur the rise in Chinese buying in cities in the United States, Canada and Australia that promise cleaner air, good education and rule of law alongside bricks and mortar.

In the past year or so, Chinese citizens have become the biggest group of foreign buyers in key Western cities, such as Sydney and New York, said real estate agents. “Most of our customers these days are from mainland China, so we decided we should come here to meet them on their home turf,” said Mr Alan Jurd of Luxury Estates, which specialises in selling Australian farms, resorts and vineyards.

Prestige properties on display at Beijing’s Luxury Property Showcase last week included a 40.5ha top-producing winery with a cricket pitch in Australia’s Hunter Valley, an entire Solomon Island where the Duke and Duchess of Cambridge spent a night in 2012 and Old McDonald’s Farm in an area of outstanding natural beauty in New Zealand.

None had higher price tags than the suburban villas, which barely have gardens and are squashed into their cramped gated community.

Chinese buyers are finding more reasons to turn overseas, including the recent drop in domestic property prices. In March, average housing prices across the country fell 6.1 per cent year on year, a Financial Times analysis of official figures showed — the biggest fall on record and the seventh consecutive drop.

With more investment piling into residential property construction and an enormous unsold inventory across China, such price falls are expected to only accelerate in the coming months.

President Xi Jinping’s anti-corruption campaign has also prompted many Communist Party officials and businesspeople to diversify their wealth into assets that are beyond the reach of the all-powerful anti-graft authorities.

Net capital outflows from China reached a record US$91 billion in the final quarter of last year, following an outflow of US$56.7 billion in the third quarter.

China’s strict capital controls, which limit residents to a maximum US$50,000 worth of foreign-exchange transactions a year, mean much of the money heading abroad to buy property is technically illegal.

Although there are legitimate ways around the curbs, most offshore transfers are done through underground banks or exporting companies, state-owned enterprises or government departments that have a right to transfer money abroad.

“For smaller amounts, there is the gem and fine-art trade. But for larger amounts, the easiest way is to leverage a government department or state enterprise with a foreign-exchange quota — I have good connections and can provide that service to clients who want to purchase property overseas,” said an agent at Luxury Property Showcase who asked not to be identified.

Three other exhibitors said they could also help clients evade China’s capital controls. For now, Beijing property agents say the prices of developments such as Palm Beach are supported by China’s recent stock-market boom, which has seen the benchmark Shanghai Composite Index double in less than a year.

However, as the country’s wealthy continue to diversify their property portfolios abroad and discover what the rest of the world has to offer, analysts reckon these prices will eventually come crashing down to earth.

THE FINANCIAL TIMES

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