While Far East investors have always featured prominently in the world’s real estate market the emergence of China as a real estate superpower has taken many by surprise.
Where has the money come from?
It is common knowledge that the riches within China are held within a very small tight knit business community often with connections to the Chinese government. These individuals and companies made significant returns on Chinese real estate investments although the recent economic slowdown and problems within the Chinese real estate market have prompted many to look overseas.
It would be naive to suggest that the Chinese government has relinquished its iron grip on the Chinese population but there is also no doubt investors are now more able and willing to look at alternatives to their domestic market. Those who follow the Chinese real estate market will also be well aware that a number of prominent real estate companies are feeling the financial pinch. There have been issues with secured bonds, falling asset values and reduced demand in the short term.
Will Chinese overseas investment continue?
There is no doubt that Chinese investors have certainly changed their investment strategy and will be even more prominent on the worldwide stage in the medium to long term. It is also worth noting that many of the investors and companies looking outside of China often have financial links with the political elite and therefore access to significant funding. This is likely to continue into the future because the more influential the country is on the worldwide stage the more powerful the voice of the Chinese government.
It is also worth noting that the vast majority of Chinese real estate investment is transacted on a long-term basis which is perfect for the real estate market. Indeed Chinese investors have been prominent across parts of Europe and other troubled markets which are still fighting the after-effects of the 2008 US led economic downturn. This balanced view on real estate assets is likely to create significant long-term returns for Chinese investors and perhaps many of us will look back and wonder why we did not follow their lead?
Are the dynamics of the real estate market changing?
While Chinese investors are certainly grabbing the headlines at the moment only a few years ago it was the Russian contingent looking outside of their domestic market. The reality is that the real estate market is an ever-changing animal with new trends emerging on a regular basis. Chinese investors may be the headline news at the moment but a relatively small movement in currency markets could favour another group of international investors.
Guessing who will be next to take the lead in the worldwide real estate market is not an easy conundrum!