The Globalisation of Real Estate

The Politics and Practice of Foreign Real Estate Investment

Dallas Rogers, Sin Koh, Dallas Rogers, Sin Koh, Dallas Rogers, Sin Yee Koh

• Publisher: CRC Press
• Year: 2018
• eBook ISBN: 9781351265782
• Edition: 1
• Topic: Business
• Subtopic: Real Estate
• Index: Business

Individual foreign investment in residential real estate by new middle-class and super-rich investors is re-emerging as a key issue in academic, policy and public debates around the world. At its most abstract, global real estate is increasingly thought of as a liquid asset class that is targeted by foreign individual investors who are seeking to diversify their investment portfolios. But foreign investors are also motivated by intergenerational familial security, transnational migration strategies and short-term educational plans, which are all closely entwined with global real estate investment. Government and local public responses to the latest manifestation of global real estate investment have taken different forms. These range from pro-foreign investment, primarily justified on geopolitical and macro-economic grounds, to anti-foreign investment for reasons such as mitigating public dissent and protecting the local housing market. Within this changing geopolitical context, this book offers a diverse range of case studies from Canada, Hong Kong, Singapore, Russia, Australia and Korea. It will be of interest to academics, policymakers and university students who are interested in the globalisation of local real estate. The chapters in this book were originally published in the International Journal of Housing Policy.

INTRODUCTION

The globalisation of real estate: the politics and practice of foreign real estate investment

Dallas Rogers

and Sin Yee Koh

¹

Foreign investment in residential real estate – especially by new middle-class and super-rich investors – is re-emerging as a key political issue in academic, policy and public debates. On the one hand, global real estate has become an asset class for foreign individual and institutional investors seeking to diversify their investment portfolios. On the other, a suite of intergenerational migration and education plans may also be motivating foreign investors. Government and public responses to the latest manifestation of global real estate investment have taken different forms. These range from pro-foreign investment, primarily justified on geopolitical economic grounds, to anti-foreign investment for reasons such as mitigating public dissent and protecting the local housing market. Within this changing global context, the six articles in this special issue on the globalisation of real estate present a diverse range of empirical case studies from Canada, Hong Kong, Singapore, Russia, Australia and Korea. This editorial highlights four methodological challenges that the articles collectively highlight; they are (1) investor cohorts and property types, (2) regulatory settings, (3) geopolitics and (4) spatial differences and temporal trajectories.

Introduction

Foreign investment in residential real estate is re-emerging as a key political issue in several Anglo-sphere and Asian countries. The global real estate activities of the Four Asian Tiger countries (i.e., Hong Kong, Singapore, South Korea and Taiwan) in Anglo-sphere markets in the 1980s are well documented. The increasing foreign investor activity of new middle-class and super-rich investors from Brazil, Russia, India, China and South Africa (known collectively as the BRICS) in global real estate markets has introduced or revived some deep-seated cultural and political sensitivities (Rogers, Lee, & Yan, 2015).

Government and public responses to the latest manifestation of global real estate investment has taken different forms. On the back of the well-reported rise in Chinese investment in local real estate in Australia, for example, in 2014, the federal government conducted a parliamentary inquiry into individual foreign investment in residential real estate. In Canada, under mounting pressure to take action on housing affordability, the government reviewed their investment visa programme. In London, a 300-strong group of protestors picketed against foreign real estate investment outside The World Property Market international real estate event. Meanwhile, European Union countries such as Spain, Greece, Cyprus and Turkey have introduced visa schemes targeting investors from Asia, Russia and North America in an attempt to attract global capital to their local real estate markets. In Asia, the Chinese government tightened up foreign investment rules for real estate in 2010, and the Singaporean and Hong Kong governments introduced staged ‘cooling measures’ with implications for foreign investment in real estate beginning in 2009 and 2010, respectively. In the fluid regulatory environment in Hong Kong, the government suspended their Capital Investment Entrant Scheme in January 2015.

Within this changing global context, the six articles in this special issue on the globalisation of real estate present a diverse range of empirical case studies from Canada, Hong Kong, Singapore, Russia, Australia and Korea. David Ley (2015) examines the impact of international real estate investment on the local housing market in Vancouver, Canada. Choon-Piew Pow (2016) exposes the strategies that are used by investors and the government in Singapore to create and seek out new safe havens within which to ‘park’ and ‘grow’ super-rich wealth. Karita Kan (2016) moves beyond culturally essentialist analyses of global real estate transactions to show how Hong Kong investors have made inroads into the Mainland Chinese market. This analysis draws attention to geopolitical questions at the abstract level of the nation-state as well as the more embodied level on the ground. Mirjam Büdenbender and Oleg Golubchikov’s (2016) article also considers geopolitical questions. It demonstrates that global real estate and property markets play an increasingly important role in international relations, and in this Russian case study, foreign investment has emerged as a form of soft geopolitical power. Hyung Min Kim’s (2016) article shows how foreign investment is organised socio-spatially in Seoul, Korea. In this case, a knowledge of local conditions, which is often built through previous residency or a shared ethnicity, is important in shaping the spatial distribution of foreign investment in the city. Finally, Alexandra Wong focuses on Mainland Chinese foreign real estate investments into Sydney’s Chinatown district, with Chinatown being an important global-urban node within the emerging Chinese foreign real estate market in Sydney.

This editorial contextualises these articles with recent scholarship on the globalisation of real estate to speculate on the methodological challenges this special issue might expose. We are not suggesting that this is a definitive list of the methodological challenges that will confront further empirical and theoretical scholarship in this area. Certainly, there are many more methodological challenges that we have not covered, such as the financialisation of real estate (Fields, 2015), reports of black and grey financial channels, lucre and suspect money sources, and corruption (Rogers & Dufty-Jones, 2015), or the financial, digital and global commodification of real estate (Madden & Marcuse, 2016; Rogers, 2016b). Nonetheless, reading across the articles we find four methodological challenges that deserve a short exposé in this editorial; they are (1) investor cohorts and property types, (2) regulatory settings, (3) geopolitics, and (4) spatial differences and temporal trajectories.

Investor cohorts and property types

There are important differences between the various foreign investor and property categories within the global real estate sector. Individual foreign investors are different from institutional investors. A new residential apartment in a middle-class suburb in Sydney is different from an ‘ultra-expensive condominium’ in New York’s recently rebranded ‘Billionaire’s Row’ (Madden & Marcuse, 2016, p. 39). These properties are different again from a large cattle station or other large agricultural properties that are purchased by foreign commercial entities. The different investor groups and property types are not always fully teased out in the academic scholarship and they are regularly conflated in the public debate.

Although contested, there are broadly four meta-individual foreign investor cohorts that are beginning to frame the renewed focus on foreign real estate investment (Koh, Wissink, & Forrest, 2016). These are largely conceptualised as a set of financial ‘disposable asset’ categories – to the exclusion of the first cohort listed below, which is class-based. The investor cohorts are: (1) the new middle-class (NMC); (2) high-net-worth individuals (HNWI); ultra-high-net-worth individuals (UHNWI); and ultra-ultra-high-net-worth individuals (UUHNWI). The NMC is a term that increasingly refers to the expanding middle-class in the BRICS countries. HNWI are often defined as people who hold disposable assets that exceed US$1 million (Hay, 2013, p. 4). UHNWI are defined as individuals with asset holdings in excess of US$30 million (Hay, 2013, p. 4). According to one professional super-rich wealth manager, UUHNWI are defined as people who hold an ‘absolute bare minimum’ of US$50 million in disposable assets that can be solely contributed to a wealth management fund (Harrington, 2016, p. 71 citing an interview with a global wealth manager). These three ‘disposable asset’ categories (HNWI, UHNWI and UUHNWI) exclude primary residences, collectables and other consumables (Atkinson, 2016, p. 1307; Harrington, 2016; Hay, 2013; Rogers, 2016a, p. 8). Wealth management funds might include a portfolio of ultra-expensive residential or commercial real estate properties in cities such as London or New York (Atkinson, 2016; Fields, 2015; Harrington, 2016; Madden & Marcuse, 2016; Rogers, 2016a).

Within this context, the articles by Kim (2016), Wong (2016) and Kan (2016) call into question the utility of rigid financial ‘disposable asset’ investor categories for global real estate analyses. These articles show that there are additional ways to further augment these financially defined investors cohorts, including by class (Koh et al., 2016), mobility (Atkinson, 2016), familial relationships (Robertson & Rogers, in press), and age and gender (Knowles, 2016), to name a few. Contemporary global real estate practices unhinge any class, capital or culturally essentialist assumptions we might use to frame these categories, because the global real estate industries, which are central to moving human and financial capital around the world, are increasingly blurring the cultural boundary between the ‘West’ and the ‘East’ (Rogers, 2016a, p. 134). Thus, we get both the separating out and the bringing together of different class, cultural and wealth groups within the literature and public debate about foreign real estate investment (also see: Forrest, Koh, & Wissink, in press-a).

For example, the rise of Chinese foreign real estate investment has made the cultural demarcations of this particular investor cohort more prevalent. These types of culturally mediated analyses show that individuals from the Asia-Pacific region have become the greatest contributors to the HNWI and UHNWI cohorts (Hay, 2013, p. 5). This follows on from mid-1980s scholarship by Goldberg (1985) and others which argued that Asian investments into Pacific Rim countries favoured real estate as an investment strategy. In 2012, Wealth-X (2012) estimated that there were 11,730 UHNWI real estate investors in Asia with at least 13% of their net worth held in real estate. Brooke Harrington (2016, p. 11) argues, ‘as world wealth has grown to record levels … to an estimated US$241 trillion – inequality has also grown, with 0.7 percent of the global population owning 41 percent of the assets’. Remarkably, UHNWI real investors from the six markets of China, Hong Kong, India, Indonesia, Malaysia and Singapore constitute 87% of the population of UHNWI real estate investors in Asia, and hold 91% of the net worth that is held in real estate in Asia (calculated from Wealth-X, 2012, p. 7). More recently, a survey of UHNWI investments in 2015 (Knight Frank, 2015) shows that the global average in property investments in the overall investment portfolio is 32%, with higher allocations in Australasia (42%), the Middle East (40%), Asia (38%) and Europe (33%).

The personal motivations of international investors are important too, and they can extend far beyond any financial considerations to include, for example, the intersection of familial, migratory and education considerations (Robertson & Ho, 2016; Robertson & Rogers, in press). Wong (2016) and Kim’s (2016) articles explore the ethno-cultural dimensions of foreign real estate investment. They draw attention to the roles that migrant- and diaspora-led real estate intermediaries play in mediating the global connections between different investors and across nation-state borders. They expose a range of culturally responsive services that facilitate foreign real estate investment via a suite of new multi-cultural investor-buyer networks (also see: Ley, 2015; Rogers et al., 2015).

Wong (2016) shows how foreign investors are motivated by the opportunities that exist in Australia, particular as they relate to their own migration plans, their children’s education and the financial security that Australian real estate supposedly guarantees. Equally, China’s state-led housing cooling measures that apply to local real estate markets in Chinese cities are suggested to be motivating Mainland Chinese investors and developers to seek out foreign investment opportunities for their surplus capital. Within this broader shift in the global landscape of property investments, Wong argues that the knowledge-based economy of Sydney has attracted large numbers of Mainland Chinese skilled migrants, who prefer to live in the central business district where Chinatown is located.

Kim (2016) finds an explicit spatial pattern to foreign real estate investments in different neighbourhoods in Seoul, Korea. Kim’s geospatial analysis of three neighbourhoods covers: (1) Yeonhee dong, (2) Yongsan and (3) Gangnam. Yeonhee dong attracts the Hwagyo (non-Korean Asians), who include the Taiwanese and Mainland Chinese diaspora who have been living in Korea for more than a century. Yongsan, north of the Han River, attracts a more diverse composition of foreign investor-buyers and residents. The famous Gangnam district, south of the Han River, attracts Korean emigrants and the returning diaspora community. Kim argues that a working knowledge of the local social, cultural, economic and political landscape of each neighbourhood – either acquired through previous residency or accessible through shared ethnicity – shapes foreign real estate investments in these specific localities. Therefore, the practices of the foreign real estate investors are shaped by more than financial motives. In this case, there are complex ethno-cultural dimensions that shape foreign real estate investment and the way various diaspora communities and investments impact the urban landscape (also see: Bose, 2014; McGregor, 2014).

Focusing on investments from Hong Kong into Mainland China’s real estate markets, Kan’s (2016) article further complicates the notion of ‘foreign’ and ‘local’ within global of real estate analyses. Her analysis shows how the constructed ‘foreignness’ of Hong Kong developers in Mainland China worked for, and subsequently against, the developers at different times and places. In the first two decades of the reform period in Mainland China, Hong Kong developers w...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Contents
• Citation Information
• Notes on Contributors
• 1. Introduction – The globalisation of real estate: the politics and practice of foreign real estate investment
• 2. Global China and the making of Vancouver’s residential property market
• 3. The (geo)politics of land and foreign real estate investment in China: the case of Hong Kong FDI
• 4. Courting the ‘rich and restless’: globalisation of real estate and the new spatial fixities of the super-rich in Singapore
• 5. The geopolitics of real estate: assembling soft power via property markets
• 6. Transnational real estate in Australia: new Chinese diaspora, media representation and urban transformation in Sydney’s Chinatown
• 7. Chinese investment in Australian housing: push and pull factors and implications for understanding international housing demand
• 8. Ethnic connections, foreign housing investment and locality: a case study of Seoul
• Further reading
• Index