How much influence do Chinese investors have on real estate markets?

Home affordability is less favourable for second steppers

Home affordability is less favourable for second steppers

It does not take long to find yet more news of Chinese investors looking at overseas real estate markets from London to Canada, Australia to the US and everything else in between. The last decade has seen an enormous increase in Chinese investment in worldwide real estate and despite ongoing problems with the Chinese economy, and the Chinese property market, this is set to continue for some time to come. So, how important are Chinese investors to the worldwide real estate market?

It all started in the US

Many years ago Chinese funds began to pour into the US real estate market and recent figures show that the US attracts more Chinese real estate investors than any other country in the world. In many ways overseas investment in markets such as the US was seen as a hedge against problems/restrictions in the Chinese economy and real estate markets. It is no secret that the Chinese authorities have a very hands-on approach to economic growth and wealth distribution – with the majority of corporate wealth spread across a relatively small number of bodies.

Chinese investors step in to Latin America

As the worldwide economy began to collapse in 2007/08 we saw the emergence of a new superpower in the shape of Latin America with the likes of Brazil and Mexico flexing their muscles. As the area began to prosper from an economic point of view we saw a massive influx of investment from China covering everything from government funding to real estate. Critics suggest that the Chinese authorities were behind much of this investment and indeed a growing dependence upon investors from China has given the country enormous power and influence in the region.

Repatriation of funds

Over the last year or so, at a time when the Chinese economy and Chinese real estate markets were struggling, there was talk of Chinese investors repatriating their funds. Publicly the investment arena in China is more open than it ever has been put under the surface the authorities still pull the strings in a variety of different ways. They can very quickly and very easily influence the direction of overseas/domestic investment and could introduce an array of penalties to encourage repatriation of funds.

However, while there has been some repatriation by businesses and individuals, having seen losses on their Chinese real estate investments, we have not seen repatriation at levels expected by some experts. However, it is now evident that many Chinese real estate companies overextended themselves in the good times and are now struggling to finance their debts. There is also the fact that despite the size of China, the real estate market is centralised upon a variety of large cities leaving much of the country untouched.

Will Chinese investors continue to look overseas?

It seems inevitable that Chinese investors will continue to invest significant amounts in overseas real estate markets as a means of offsetting issues in their domestic arena. The economy, one of the largest in the world, is going through something of a difficult patch and this is reflected in the performance of the property market. As a consequence, more and more Chinese real estate investors will be looking to switch their funds overseas although do not rule out the “influence” which the Chinese authorities still have over the country!

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