The Chinese, who traditionally believe strongly in real estate, have long had their eye on the German residential property market. Due to the ownership restrictions in China, investors are now looking for various real estate markets to buy, preferably in locations with stable and high-quality properties. It is not only the super-rich Chinese who invest in “overseas property”. Observers say that buying flats has become a hobby for some Chinese.
The steadily growing middle class is increasingly interested in investment opportunities with high returns. In recent years, China has experienced an amazing real estate boom with large increases in value. Real estate prices in Beijing, Shanghai, Shenzhen or Guangzhou have shot up to 50% in recent years and there is no end in sight. Many Chinese expect a similar development in Germany and want to profit from it. German real estate is very affordable in international comparison, which is why the German real estate market is developing into one of the most attractive destinations for international and also Chinese investors.
Why Germany?
The Real Estate Expo “Spring of Shanghai” noted that Chinese buyers are very interested in investing in progressive, English-speaking countries where their children can study. Nevertheless, Chinese investors find Germany, as a German-speaking country, an interesting alternative because of its schools, which are known for offering world-class education. Germany, the economic powerhouse of Europe, is one of the most popular real estate investment locations in the world. There are many factors that contribute to the fact that year after year more and more Chinese people come to the country as property investors. The attractiveness for Germany is underpinned by its robust and resilient economy and high degree of political stability. With a population of more than 80 million people, the workforce is highly qualified and well educated and is supported by many well-educated migrants. A significant number of the world’s leading companies are based here, including the world’s most prestigious car brands such as Mercedes Benz, Porsche and BMW. Situated in the heart of Europe, Germany has an extensive and well-developed infrastructure which provides highly efficient links to the domestic market and direct access to the most important international markets.
- Strong Trade Relations
- Raising Funds
- Release Foreign Exchange Reserves
- Growth Of The German Property Market
- Intercultural Hurdles
- Feng Shui Must Be Considered
- First Make Friend, Then Make Business
In Europe, Germany is by far the most important trading partner for China. The establishment of diplomatic relations in 1972 was the starting point for a success story that unites both countries more strongly than ever before. In 2018 exports from Germany to China amounted to around 93.1 billion euros, while imports from China to Germany reached a value of 106.2 billion euros. With a trade volume of over 200 billion euros, Germany is the sixth most important trading partner of the Middle Kingdom worldwide. And the figures also show that the strong economic relations also work the other way around – China ranks third in the world among Germany’s trading partners.
On top of this, Germany has an excellent legal system and a competitive tax system. Moreover, the protection of Chinese and German investments is underpinned by the bilateral agreements on avoiding double taxation and the investment protection agreement. Investments in Germany as an EU member state open opportunities for access to the entire EU internal market! In this context, the EU has started negotiations with China aimed at ratifying a comprehensive investment protection agreement.
Efficient transport connections and direct flights from Germany’s largest passenger and cargo airport in Frankfurt allow smooth and easy access to the Chinese metropolises. All this makes Germany attractive for Chinese investors.
Pooling money for an investment is quite common in China. Most Chinese people ask relatives for help and collect to make a sufficient down payment. Wealthy buyers, on the other hand, can easily locate their trading offices or businesses in countries where there are no currency restrictions. This allows them to pay through their companies’ offshore accounts.
China must slow down the rapid build-up of its foreign exchange reserves. With currently $ 2.85 trillion, it is considered the largest in the world. Releasing China's foreign investment can do just that.
After all, the real reason why Chinese investors prefer to invest in Germany lies in its potential to offer investors high returns on commercial and buy-to-let property investments. Popular locations include Berlin and Frankfurt. It is important to note that Germany stands for long-term investments. Western Germany has seen a significant increase in property values. In addition, the economy is improving as the unemployment rate is falling and there is a high proportion of fixed-interest loans, which gives stability to the residential property market.
Nevertheless, it must be remembered that every beginning is difficult and the cultural differences between Germany and China are still surprisingly large. Despite the opening of China more than 40 years ago, differences in mentality still influence economic cooperation between the two countries.
The biggest hurdles for successful investments by Chinese in Germany are of an intercultural nature: language, culture, manners and communication styles are the biggest challenges.
A great deal of patience is required in business negotiations. German companies are much more pragmatic and, above all, interested in the efficiency of their business. They want negotiations to be concluded as quickly as possible, while the Chinese want to examine everything carefully. The process of buying property and the legal requirements are very different in China, so potential buyers always have a lot of questions. Chinese buyers are exceptionally cautious in financial transactions and examine every clause and condition meticulously. They are often highly educated and experienced businesspeople. They also often have very different ideas about the flat floor plans or other architectural aspects. The sales staff must be very sensitive. That is why we use native-speaking consultants who are at home in both worlds throughout the entire sales process.
When it comes to floor plans, for example, Feng Shui aspects must be considered: a square floor plan is always preferred, a triangular bay window can be a knockout argument just as much as a cemetery in the neighbourhood. No Chinese buys an apartment with sharp corners. Flat inspections are often done with a compass, because the orientation plays a big role. In our flats we must pay attention to special features like a glass sliding door to the kitchen. Because Chinese people do not like cooking smells in the flat.
Through our branch in China we can address many questions at an early stage in discussions with potential buyers. We clarify and inform about all aspects and realities of real estate investments in Germany and especially in Frankfurt.
When it comes to business, a Chinese must have the right gut feeling. Especially when it comes to real estate, something like a “feeling of home” must be created. There is a Chinese proverb that says: “First make friend, then make business”, so you attach great importance to a trusting business relationship. That’s why a lot of business is done through referral business. We have 10 employees in our Chinese sales team, who are all native speakers of Chinese. That is enormously important. In addition, we have 15 years of experience in the Chinese market. We support our customers in all questions and give them the “all-inclusive carefree package”. This is an important criterion for our customers. We help with overseas loans, administration, residence permits; in short, everything that is important to ensure that our customers receive an ideal concept and that their gut feeling is right. This is only possible with above-average commitment and in the end that makes the difference.