Wednesday, March 24, 2021
Dear Your Overseas Dream Home Reader,
Greetings from Puerto Vallarta. This is my base for the week…
A boutique hotel with views over the Bay of Banderas, right at the edge of town.
For a full week, I’m putting boots on the ground and running the rule over numerous new projects here, each with the potential of becoming a new RETA deal.
I’m hoping that at least one will make the grade…
And I expect to have a deal in front of RETA members within the next three months or so.
More about that tomorrow…
Today, I want to bring your attention to another part of the world. I want to tell you about the village of Kidlington in England and the strange thing that started happening there in 2016.
The Mystery of the Chinese Tourists
Kidlington is almost entirely unremarkable…
It has a library, seven pubs, two cafes, four restaurants, a Domino’s Pizza, and a church. Not unlike thousands of other villages across England.
Yet, in the summer of 2016, Kidlington had one unique thing going for it: Chinese tourists were showing up by the busload.
It had the locals baffled…
There was no obvious reason why Chinese visitors had suddenly taken an interest in their nondescript country village.
Stranger still, these tourists didn’t show much interest in the 13th-century church or the traditional thatched-roof cottages. Instead, they gravitated towards the mundane. The modern residential streets, the suburban homes from the 1970s, the manicured front lawns.
Theories started to emerge…
One was that the tourists were part of a tour group on their way to nearby Blenheim Palace. But having opted out of that optional Chinese language tour, they were posited in Kidlington by their tour operator instead.
Another was that Kidlington was a convenient stop on the way to Bicester Village, a discount luxury retail destination for Chinese shoppers.
But the reason why the small village of Kidlington turned into a popular Chinese tourist destination turned out to be far simpler: The Chinese tourists just wanted to see ordinary English life and something completely different to life in China.
Chinese tourism is made up of a rapidly growing middle class. These are people who live in anonymous concrete tower blocks in huge mega-cities. Now, they have more money to spend and more time to travel. And for them, a quiet tranquil village in the English countryside is indeed something special.
The “China Effect”
I’ve been tracking this “China Effect” on the RETA beat for some time. The Chinese middle class is growing by leaps and bounds. And they are using their newfound wealth to travel abroad.
In fact, according to data from the World Tourism Council, China has been the largest source of outbound tourists since 2012, with departures growing from 4.5 million in 2000 to 150 million in 2018. That’s an increase of 3,233% in less than 20 years, with an average annual growth rate of 16%.
Demand for international travel is so high in China that forecasts from COTRI analytics see a record-breaking year for outbound travel in 2022.
For short-term rental owners, the rapid rise of Chinese tourism shouldn’t be overstated.
Not only are the Chinese traveling more. They’re getting more sophisticated too. While in the past, Chinese tourists traveled primarily to shop, today, “experience” has become their primary motivator.
There’s a shift away from tour group travel, towards individual, self-catered travel. They’re booking their own flights, checking reviews on travel apps to figure out where to dine, and…securing their own accommodation, often vacation rentals on Airbnb and other services.
With the right rental, in the right location, you can tap into the world’s biggest tourist market, which, by any measure, is just in its infancy.
The question is: Where are the Chinese going?
Following the Tourist Trail
There are, of course, many quirks to Chinese style tourism. Defying all expectation, they show up to an unexceptional village in England. In France, they’ve notedly started arriving at lavender farms. And the rise of “Red tourism” is seeing a jump in Chinese visitors to former communist countries like the Czech Republic.
These are all niche opportunities in an increasingly segmented market.
However, there are also tourism staples…places that feature on nearly every Chinese tourist’s bucket list. Iconic destinations that are “must see” because of their overwhelming historical and cultural significance. Places Chinese tourists will spend money…
One such destination is a place where, right now, because of this crisis moment, we can buy rentals at pricing that’s as much as 30% below what it was in early 2020.
It’s a place I discuss in more detail in this month’s issue of RETA, which will drop to members tomorrow. Inside, I’ll explain exactly how we profit from the “China Effect,” and the play that will maximize our gains.
RETA members stay tuned to your inbox.
If you’re not yet a RETA member, sign up here.
Wishing you good real estate investing,
Ronan McMahon, Real Estate Trend Alert
Your Comments and Questions
Elizabeth says: Hi Ronan! We are ready! We have decided where we want to invest, know our risk profile, have contacts on the ground, and are itching to pull the trigger.
But we want to use leverage to purchase something of higher value than we actually have in liquid funds. We don’t want to use an in-country lender in Portugal where we are looking to invest, so that we can qualify for the Golden Visa with external funds.
Do you have international mortgage lenders who you would recommend?
Thanks for all the great info you’ve provided!
Ronan says: Hi Elizabeth, I don’t. And remember an external lender is unlikely to offer anything near the 1.1% to 1.7% you may be able to borrow at in Portugal. Even if an external lender offers you 5% or 6% secured on an asset back home, you will still rack up a lot of extra interest.
So, my question to you would be: Do you need the Golden Visa? There are other residency options in Portugal that might do the trick, allowing you to borrow locally. Just a thought…