Market Turmoil Seen Spurring China Property Purchases Overseas
29 Aug 2015
Instability drives Chinese to seek havens in global real-estate investments, as Australia worries about overheated market
Signs are emerging that Chinese property investments abroad will maintain their torrid pace despite the market turmoil, as wealthy individuals and well-heeled companies seek to shelter their money in more stable havens abroad.
In Australia, where China earlier this year topped the U.S. as the biggest source of foreign real-estate investment, officials are worried that wealthy Chinese investors will pour more money into an already overheated Australian property market.
Chinese investors are “looking for safe, stable, secure investments,” Treasurer Joe Hockey told The Wall Street Journal on Wednesday. “Australian real estate is very attractive for them in that regard,” he said, singling out “skittish Chinese investors.”
China’s currency devaluation earlier this month sparked a global sell off of stocks amid concern over the nation’s economic health. After dropping by nearly a quarter, the Shanghai Composite Index rose 5.3% on Thursday. Any rise in Chinese investment would come despite the yuan’s diminished buying power abroad.
" If wealthy Chinese feel that the recent devaluation is the beginning of a much longer and deeper depreciation, they may be motivated to move liquid assets overseas before that happens.", Chinese buyers property expert says.
Chinese foreign property investments may get a further boost from Beijing’s plan to loosen its capital controls with a new trial program in six cities allowing wealthy individuals to invest directly in overseas assets including real estate.
In Australia, a fresh surge into Australian property worries policy makers, who believe real-estate prices in big cities, such as Sydney and Melbourne, have in the past two years risen to levels that are pushing many middle-class families out of the market. Foreign buyers, including from China, are among those driving the boom, officials say.
Earlier this year, Australia’s foreign investment review body said China had overtaken the U.S. as the country’s biggest source of investment from overseas, with a total of 27.6 billion Australian dollars (US$19.6 billion) last year. Residential and commercial real estate accounted for almost half of that.
Mr. Hockey said officials were closely monitoring overseas interest since the turmoil of recent days on global equity markets.