Despite the fact that many people believe the worldwide real estate market has limited upside in the short term it seems as though Chinese real estate investors are still happy to look at the likes of Australia, the UK and the US. This is a trend which began a few years ago as the Chinese economy began to slow down and property prices followed suit. However, the Chinese real estate market is not typical when compared to your European, Australasian or North American markets.
Chinese real estate under pressure
When you consider that sales of new homes across China were down 17% in the first two months of 2015, compared to the same period in 2014, this reflects the ongoing difficulties the market is experiencing. It is also reported that of the 70 cities surveyed in a recent real estate study 66 had seen prices fall during the first two months of 2015. At this point it is worth noting that the Chinese real estate market accounts for, depending who you believe, between 16% and 25% of the country’s GDP. So, in many ways the ongoing reduction in Chinese real estate exposure, because of the weakening economy, is turning into a self-fulfilling prophecy.
Education, education, education
In the words of prime ministers and presidents of years gone by, education is vital factor of everyday life. It is also becoming evident that many Chinese citizens are continuing to encourage their children to enjoy overseas education facilities which not only broaden their minds but also broaden their experiences. As a consequence, there is a growing trend towards acquiring residential property in Australia and due to the tweaking of overseas student education rules this is something which will continue for some time to come.
It is also worth remembering that the Australian authorities recently came under pressure for insinuating that overseas investors were squeezing Australian real estate prices to unaffordable levels. An independent survey found that not only are there adequate controls on overseas investment but the amount of money “pouring” into the Australian real estate market is minimal compared to domestic investment. Whether overseas investor influences will strengthen in the short to medium term, with Australian education facilities much sought after by Chinese families, remains to be seen.
US is still the preferred market
The US has always been an investment magnet for many overseas investors – in particular those who have made their wealth in China and are looking to diversify. Again, in tandem with Australia, education is a very important factor in the life of the traditional Chinese family and the US market seems to tick all the boxes with regards to real estate and overseas student facilities. To a certain extent this overseas investment fund flow has helped to support the US real estate market through what has been a difficult time.
Chinese real estate investors have been reducing their domestic exposure in favour of the likes of Australia, the UK and the US for some time now. As we touched on above, in some ways this is a self-fulfilling prophecy because many have reduced their exposure due to the struggling Chinese economy although further real estate falls place yet more pressure upon GDP. There is no doubt that we have seen a sea change in the minds and attitudes of Chinese real estate investors over the last decade and their influence on overseas markets continues to grow.