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Why do Chinese individual investors invest in residential real estate in Europe?

Throughout the past five years we have been observing a growing share of buyers from China among those purchasing residential properties in Europe. For many market observers, this has not been a surprise. It was a much expected process which turned out to be a salvation after crises in the real estate market, especially in Southern Europe. Obviously, Chinese investors look for a safe haven for their capital and interesting return rates, but the European nature of their investments is a result of something else as well.

Many countries that suffered from the crisis or slowdown in the real estate market in the years 2006–2008 decided to introduce programmes allowing investors from outside the European Union to obtain residence permits or citizenship after investing a particular amount in the real estate market. The countries that made that decision were Cyprus, Portugal, Spain, Greece, Latvia, UK, Ireland, Hungary. These programmes differed in terms of details, such as the minimum amount of investments and minimum time, but generally they all aim at improving the situation in the entire real estate market or its segment and at aiding banks in liquidating assets they had taken over.

The programmes turned out to be a major success, especially in Cyprus and Portugal. Quoting data from Portugal (as of 27 February 2017) it can be seen that Chinese investors comprise nearly 82% of all buyers in the "Golden Residence Permit (ARI)" programme. During the 4 years of the programme, 4,567 investment visas were issued, and the total value of investments exceeded EUR 2.808 billion. The ARI programme, combined with the non-habitual tax resident programme, allowed Portugal to be the quickest of the Southern European countries to cope with the real estate market crisis. Nowadays, the programme is evolving in the direction of investments aimed at restoring dilapidated centres of cities such as Lisbon or Porto. In a similar fashion, Cyprus attracted nearly EUR 2.7 billion during eight years of the investment visa programme. Looking at the CEE region, Latvia introduced a corresponding programme to attract nearly EUR 300 million

Many of the countries that offer similar programmes attempt to approach investors in the long-term and provide them or their families with a possibility to become tax residents of a particular country, e.g. by creating simplified regulations and gift and inheritance tax reliefs. Portugal is the best example.

The EU residency or passport is of great importance to Chinese investors. Apart from allowing them for easy travel between the member states, without the need for applying for a visa every time, it also enables them freedom of establishment in the EU territory. For many individual buyers, the access to the European education system or the quality of the natural environment in Europe is also of tremendous importance.

Nowadays, numerous countries, especially the UK and Ireland, which employ such programmes, try to use them to achieve particular social goals. In my opinion, with a bit of involvement Poland could become a stop for investments of individual buyers in Europe and finance major projects with their participation. E.g. there is the possibility of funding the "Mieszkanie + (Apartment Plus) government programme, or of financing small infrastructure projects, like in the case of the American EB-5 program.

Marek Dzikowicz: A graduate of the Jagiellonian University and University of Economics in Kraków. Marek Dzikowicz dedicated his career to real estate. Currently he runs MD Properties, which aids Polish clients to invest in real estate and get involved in property development projects abroad. For many years, his career was linked to China, where he worked for one of closed-end real estate investment funds, carrying out projects in countries such as Portugal, Spain, Cyprus and Ireland. His work with Chinese investors allowed him to become familiar with the specificity of that market and the mentality of the investors themselves.

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