US and Canadian real estate is getting an even larger pool of foreign buyers. Juwai, Asia’s largest overseas real estate portal, is partnering with an Asian investment group. The deal, which occured last week, will make it even easier for some of Asia’s wealthiest families to scoop up overseas real estate.
Juwai is creating a partnership with the Association of Family Offices in Asia (AFO). The AFO is a group that represents the private management of high net-worth (HNW), and ultra-high net-worth (UHNW) individuals. A HNW is someone that has more than a million in liquid assets, and an UHNW is someone with more than $30 million. Basically, they partnered with a group that represents investment offices of Asia’s ultra rich families.
The partnership would see the two create new services and products, to help facilitate the buying of overseas property. Additionally, they’ll be creating a joint institutional program. The products, and program would create an even larger foreign investment eco-system. Easier and larger foreign buying pools… What could go wrong?
Wanted: Large Blocks of Condos For Asian Investors
Confused what that means? Carrie Law, the CEO of Juwai, gave us some of her insights on the deal. “This partnership will ultimately mean more high net worth investors from China and other parts of Asia can successfully source and acquire property in the U.S. and Canada,” explained Law. Also adding “Just this week [last week] we are meeting in Hong Kong with a large group of these investors to showcase selected properties, with prices that range from $20 million more than $200 million.”
This also means some interesting things for the development community. “Because these are high net worth investors and investment consortiums, we’re talking about things like large blocks of units, large developable sites, commercial property, and trophy residential assets,” she explained.
So, Like… What Does That Mean?
This is good news, or bad news, depending on who you are, and what your relationship with real estate is. Luxury sales and developers are going to see the largest benefits. If you’re an agent or developer in Canada or the US, the pool of potential luxury buyers got much larger with this deal.
In terms of supply, developers will have access to more development funds. We’re already seeing developers unable to fund their projects locally at pre-sale. Instead, they’re turning to cities like Hong Kong, and Singapore, to find investors. These aren’t just projects in Toronto and Vancouver either. We’re seeing projects in “affordable” markets like Edmonton, Calgary, and Halifax being sold overseas.
The bad news is for buyers, since this could add more middle people to the process. Increasingly, developers are turning away from local pre-sales, and looking at overseas investor events. These glitzy events, which cost up to US$100,000 a pop to host, can sell out whole buildings in just a night. The process is much faster than having to deal with hiring sales people, and sell to locals one at a time. Since these investors aren’t charities, you’ll have to pay a markup once they finally sell back into the market.
Investors aren’t stupid, they aren’t going to overpay or enter markets with a significant amount of uncertainty. Canadian developers are adding large incentives to try and attract these clients. This appears to be indicative of a slower adoption, in my opinion. After all, why add incentives if the units are being picked up at market price? So this may or may not add anything to Canadian buying pool, we’ll have to wait and see.
The only thing we know for sure, is the financialization of real estate is getting stronger. Increasingly, homes are being seen as an investment, and not a place to actually live. This has consequences, but you can’t really hate on overseas investors. If you see buying a home as a good investment, so will non-resident investors. After all, they depend on locals having the belief that homes always go up in value. Without that, they would have no market liquidity, and would then have little appeal.
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