Friday, September 25, 2015

Chinese Buyers Abroad

As buyers from China have started to spend billions in Australia, the US and the UK, property prices
have started to skyrocket.  Even as the Chinese stock market has begun to crash, experts have predicted that much more cash is still on the way.  Chinese stocks have crashed 40% since June, wiping away trillions of dollars in market value.  As the yuan devalues, the Chinese are starting to think that foreign real estate is a more stable investment than Chinese banks.  

Chinese investors have been active in residential property markets in such cities as Sydney, London and New York.  Chinese are currently the leading foreign buyers of US homes, with sales reaching a record $29 billion in the 12 months leading up to March 30.  This makes up more than a quarter of all foreign purchases by value, according to the National Association of Realtors.  Credit Suisse has predicted that sales of homes to Chinese buyers are predicted to total $60 billion between now and 2020 in Sydney alone, double the amount spent in the past six years.  In London, Savills says that Chinese buyers already make up more than a quarter of all home purchases in London.  

With prices rising fast in major cities, Chinese buyers have started to get more creative by teaming up with local partners or looking to newer markets in other countries.  In the UK, they’ve started to put their money beyond London and into surrounding areas, including Surrey.  Commercial real estate deals are also on the rise; Knight Frank predicts that Chinese investors will spend $20 billion major deals this year, compared to just $5.5 billion back in 2012.  

This interest in foreign markets coincides with limited options for investors in China; many have lost money in stocks after domestic property prices started to fall about four years ago, or in various riskier investments in the shadow of the banking sector.  Despite the annual limit of $50,000 on the amount of money somebody can move out of China, this rush into world markets has taken place through channels both legitimate and not.  Restrictions means that investing abroad requires planning and creativity, such as moving out money over a long period of time or securing approvals to send large sums abroad.  The fact that investor interest is continuing in spite of these restrictions hints that this trend isn’t going away any time soon.

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