China investors open new Spanish doors

A Lastest News about Foreign Direct Investment in Spain

Posted on: 29 Apr 2012

The increasing number (and affluence) of Chinese residents in Spain has generated a stream of investment in the country's real estate market. Prices have been falling for years and the new investment is creating a much-needed boost to services and merchandise trades associated with these residents' requirements.
SIMA 2012, the international exhibition on real estate to be held later this month in Madrid, will include, for the first time, an area for Chinese investors, with their own language services. The Fair's brochures will be also published in Chinese, providing the more interesting offers available.
This initiative came from real estate firm, Info-China Management, with headquarters in Madrid. The company's entire business is dedicated to sales of Spanish properties to Chinese investors.
The company has a branch in Beijing and a website in Mandarin which can be found through Baidu, the most widely used browsing tool on the Chinese Internet.
The company is run by Sonia Fernández, a journalist with expertise in advertising and public relations and José Luís Iglesias, an engineer and manager of quality buildings. Their team includes Chinese speakers.
This interest in attracting Chinese investment speaks directly to the 100,000 Chinese residents currently in Spain but also to possibly several million more with high disposable incomes that may be interested in attractive and historically cheap acquisitions.
Such investments may be for personal occupation or to generate returns. There are over three million empty homes in Spain and, after the real estate "bubble" in 2008, prices have been falling to ever lower levels. Although the fall was restrained in January, lately there's been a decline of up to 11% monthly, so property can be bought at prices up to 60% cheaper than a year ago.
Chinese purchasers increasing
Most Chinese people living in Spain arrive from Zhejiang Province, including some 2,000 entrepreneurs, according to rough estimates.
Many have a good understanding of the country and its economic situation. They not only invest their own money, but also advise relatives, friends or partners with very limited knowledge of Spain.
One example of this investment is in Madrid, where purchases of houses by Chinese residents grew last year by between 30% and 40%, according to data provided by Diego Vázquez, from real estate firm Mr House Properties.
Vázquez said 50% of his customer list comprises potential Chinese purchasers. The profile of his typical client is of a small trader paying rent at Euros200 per month. The trader manages to open a small business in Spain and save enough money to buy a home.
This Chinese purchaser looks at house prices from Euros60,000 to Euros100,000 and prefers to buy directly from a bank with a large portfolio of houses for sale. Such purchasers are usually well received by the banks for mortgages, which are typically at about Euros70,000. The flats are of between 60 sqm and 90 sqm, with three bedrooms.
This phenomenon is directly related to purchases of businesses run by Chinese families, particularly in the catering and fashion sectors. That's synchronised with the closure of traditional Spanish stores due to the credit crunch, retirement and consolidation.
So, the numbers of coffee bars and restaurants in major cities remain the same as in 1977 although these are now increasingly run by Chinese shopkeepers, most of whom are prepared to source goods from the Chinese mainland and Hong Kong.
To this must be added the large number of shops selling clothing, handbags and shoes, as well as gift shops, mainly featuring low prices. The newest sector in which Chinese residents have opened businesses is hairdressing.
More prosperous business people prefer single family houses outside the cities, at prices ranging from Euros300,000 to Euros450,000, with 80% financing from a bank.
Many can afford to place their children in private schools where they pay around Euros700 per month.
These upper income Chinese residents tend to buy their homes on cash-only transactions.

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Posted: 29 April 2012

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