Are Chinese property investors repatriating funds? Think again……

The ongoing turmoil surrounding the Chinese economy has been headline news for the last few days with stock markets around the world experiencing extreme volatility. Initially some experts had predicted that Chinese property investors would cash in their overseas assets and repatriate their funds to shore up their ailing Chinese balance sheets. Initially, with a number of Chinese real estate investors putting deals on hold, it seemed that this prediction could pan out although the last few days have taken a surprising turn.

Are Chinese investors bailing out of China?

Historically, as we have mentioned on numerous occasions, the Chinese government has had an iron grip on the economy basically telling investors, businesses and the general public what to do and when to do it. The current ongoing economic crisis gripping China has shown that the Chinese government no longer has that kind of control and while we saw a short-term bounce in stock markets, after fiscal action by the Chinese authorities, the situation is far from over.

Over the last 48 hours a number of US real estate agents have confirmed that many Chinese investors are actually increasing their exposure to the US real estate market. A number of deals which were “put on hold” seem to have been reactivated and, if the rumours are correct, many seriously wealthy Chinese investors are considering switching their Chinese assets for increased overseas exposure.

Is this a watershed moment for China?

It is easy to get carried away and suggest that Chinese investors are leaving the real estate market en masse however this is not necessarily the case. Historically the Chinese authorities have restricted overseas investment by Chinese investors and it is only recently that they have been able to “play on a level playing field”. Whether the growing appetite for US real estate in particular is but a simple rebalancing of this situation is debatable but to say that Chinese investors are leaving the real estate market en masse is simply incorrect.

Many people also forget that China is the largest economy behind the US and once this ongoing economic correction has been resolved the country will become “investable” again. To write off China as an investment arena at this moment in time is both bizarre and foolish because, if you turn everything about-face, there could be some interesting value plays going forward.

Momentum is everything

Ironically the US real estate market has been the subject of much discussion of late with as many “experts” positive on the short to medium term outlook as those that are negative. However, the ongoing flow of funds from China to the US real estate market continues to grow and this momentum has certainly had an impact upon a number of local US markets.

We have seen real estate agents from the likes of Seattle reporting significantly increased interest from Chinese investors and this has been replicated in other areas. Next month’s visit to the US by the Chinese president is likely to lead to closer trade relations between the two countries which can only be beneficial for not only the real estate market (on both sides of the equation) but also other investment arenas.

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