Overseas update – Chinese stamp duty surge and Q4 rush for Cypriot homes

30 September 2020 | Investment

Demand from Chinese investors for UK property soared in July after plummeting between April-June, during the height of the coronavirus lockdown.

In July, following the announcement of the stamp duty holiday by Chancellor Rishi Sunak, Chinese buyers made 213% more enquiries on British property than the year before, the findings from Juwai show.

That surge came off a low base, though. In each of the three months before July, Chinese buyer enquiries suffered double-digit declines compared to year-earlier levels, with pandemic fears and stringent travel restrictions reducing demand.

Juwai IQI executive chairman Georg Chmiel said: “Anyone who can bring their transaction forward to 2020 from next year or even later is doing so. Not only will the holiday expire, but foreign buyer stamp duty rates are set to climb by 2% next year.”

He added: “A large segment of Chinese buyers is purchasing for their children to use while studying in the UK, even if the actual dates of study might be years away. We also see a significant number of investors purchasing Build to Rent property, especially in second-tier cities like Manchester and Bristol.”

Before the stamp duty holiday, travel restrictions and pandemic fears were choking Chinese demand, Chmiel said. The stamp duty holiday has been a ‘positive electric shock that has brought demand back to life’.

The latest data followed a strong first quarter for Chinese buyer demand, although any gains were lost in the second quarter when the coronavirus crisis took hold. In Q1 2020, Chinese buyers made 9.5% more enquiries on British property than a year earlier, but Chinese demand dropped by half in Q2, with Chinese buyers making 54.1% fewer enquiries than a year earlier.

Overseas update – Chinese stamp duty surge and Q4 rush for Cypriot homes

In the month of July, Chinese demand rebounded from its mid-year low point, as reported above.

“In the first quarter, the coronavirus looked like it was going to be contained to China. Buyers looked for overseas destinations where they could escape it,” Chmiel explained. “In the second quarter, it became clear that the virus pandemic was in fact global. Many Chinese actually came to feel that they might even be safer in China than they would be overseas.”

Hong Kong demand for UK property has also soared, according to the latest statistics. Eli McGeever, vice-president of international property at SohoApp.com, said: “After the UK government announced a pathway to citizenship for BNO holders, many Hong Kong agents who sell overseas property to Hong Kongers have reported record UK home sales in recent months. Over the first eight months of 2020, property exhibitions in Hong Kong by UK developers have soared by 94%. From just 14 in January, the number of UK exhibitions climbed to 91 in August.”

He added: “By contrast, demand for Malaysia property has collapsed in 2020. Exhibitions for Malaysia property in Hong Kong are down around 30% year-on-year over the first eight months of 2020. September is set to be worse with an expected drop of 80%.”

“The number of agents based in Hong Kong promoting Malaysian property has also dropped by 57% as these agents have switched to UK properties. Some agents have reported a drop of over 80% in sales of Malaysian property – they’ve switched to selling UK property instead.”

Malaysia’s long-term investor residency visa, the MM2H visa, was a massive driver for Hong Kong residents purchasing Malaysian property in 2019, but the Malaysian government reportedly began rejecting the majority of applicants in late 2019 before suspending the program in 2020.

“As a result of the uncertainty, many Hong Kong buyers lost interest,” McGeever said.

Cypriot developer forecasts Brexit deadline rush

The fast-approaching end of the Brexit transition period (December 31) and rumoured rises to Capital Gains Tax has British buyers looking to Cyprus – a perennial favourite destination for British holidaymakers, with the added advantage of European passports and 300 days of sunshine.

That’s according to Leptos Estates, a leading real estate developer on the island, which is forecasting a final quarter rush as British buyers seek to move before the transition period ends or tax rises are introduced. The firm has seen four years of steady applications from investors and families looking to maintain their access to Europe, ever since the shock result was announced in June 2016.

The Cypriot real estate sector is crucial to Cyprus’s economy – in 2018 alone, the sector was responsible for 38.5% of the country’s annual growth rate and nearly half (45%) of purchases came from EU and non-EU investors.

Pre-Covid 19, the Cypriot property market saw steady gains, having one of its strongest years to date in 2019, seeing over €10 billion in transactions. There was a particular resurgence in sales of residential properties over €1.5 million, up 46% on 2018, as the island caught the attention of international investors. British buyers, especially, were looking for a European safe haven before the Brexit deadline.

Commenting on the historic popularity of the Cypriot real estate market with UK buyers, Pantelis Leptos, deputy president of the Leptos Group of Companies, said: “The previous two years have shown there is a real appetite for property here, particularly in the south, where most of the 60,000 British expats live. The majority of expat applications to remain after Brexit are being submitted in Paphos.”

He added: “Covid-19 has had a global impact across real estate markets, Cyprus included, but with the approaching Brexit deadline we have seen a surge in activity and Paphos is the most popular for enquiries.

He says the citizenship and residency schemes are a real draw and means that Cyprus is the seventh most popular country in Europe for UK buyers.

“We are speaking to a number of investors in the UK who are looking to maintain their access to the European market and benefit from the business-friendly tax rates. Following lockdowns, the idea of dual citizenship is appealing and a chance to experience the Mediterranean lifestyle is the fresh start people are looking for,” Leptos explained.

British and European buyers historically favour buying in Southern Cyprus because of the region’s favourable and varied real estate market and the popularity amongst tourists looking for rentals. Interest is usually focused on four main cities – Paphos, Larnaca, Limassol and the capital Nicosia.

Paphos, in particular, has a long history of being the destination of choice for British purchasers, in part thanks to the well-established expat community, where English is widely spoken.

What’s more, the transport links at Paphos International Airport and its seafront position mean the area is also a sought-after rental location for British tourists. In 2017, the city was recognised as the European City of Culture for its rich cultural offering and large-scale infrastructure investment.

Best known as the birthplace of Aphrodite, the Goddess of Love and Beauty, Paphos is recognised as a UNESCO World Heritage Site for its numerous historic landmarks, such as the historic harbour, Archaeological Park and 4th century Tombs of the Kings.

“Walking through the old town near the harbour, residents have ample choice of artisan coffee houses, bars and trendy restaurants,” Leptos said.

In the 1970s, the country was a popular holiday destination for celebrities and that remains the case today, with a number of notable stars owning homes in the city’s coastal region, most notably international singer Shakira and her partner FC Barcelona player Gerard Pique. 

Overseas update – Chinese stamp duty surge and Q4 rush for Cypriot homes

As well as the rich cultural offering, UK buyers and celebrities are typically drawn to Paphos for some of the island’s largest and most diverse properties, with a varied selection of ‘elegant’ seafront villas, modern apartments and ‘stylish’ resorts in ‘the safest area in the country’.

Those looking to relocate from the UK can also benefit from a renowned international school and new hospital.  

Cyprus’s citizenship and residency schemes remain a huge draw for international holiday home purchasers and investors, through the Cyprus Investment Programme (CIP).

In return for a property purchase of €2 million, investors will qualify for a Cypriot Citizenship with the right to live, work, travel, stay and study in Cyprus as well as anywhere in the EU. Free travel to more than 155 countries including Canada, Switzerland and Iceland is also on offer.

The Cypriot passport only takes six months to come into effect and, once acquired, is valid for life, and covers an investor’s spouse and any dependent children up to the age of 28 years.

Permanent residency is also an option, which can be achieved through a property purchase of €300,000. This option typically takes up to 60 days. Like the citizenship scheme, this covers the entire family including the parents of both spouses. 

This post has originally been featured in Property Investor Today.