According to a study by Knight Frank, from 2009 to 2014, the total value of China's overseas investment volume has skyrocketed from $0.6 billion to an estimated $15 billion. In 2014, Australia has seen the strongest growth in inbound real estate investment from China, an over 60% increase year-on-year.
Australia, the UK and the US have been the three biggest recipients of the Chinese money so far. However, while the Chinese high-net-worth-individual investors have become more market-savvy, they are looking into new investment hot spots around the globe, beyond the traditional picks: London and NY. The tricky thing is that compared with key Chinese gateway cities such as Beijing and Shanghai, a number of recent investment hot spots have shown a discount in prime residential prices – Los Angeles and Miami prime apartment prices are both about 25% lower than Shanghai, which is drawing significant interest from Chinese investors.
David Green-Morgan, JLL’s Global Capital Markets Research Director, expects more Chinese money to be invested globally, particularly in the US.
"Chinese investment outside of China has been quite incredible in 2014, not just from the wealthy individuals but also the companies, the developers, the state-owned enterprises, and the institutions; and they’re very quickly becoming one of the most important sources of capital in the real estate industry globally. We expect that to expand in 2015, I think more of continental Europe – Germany, France, Spain as well as many cities in North America – they’ve done most of their investment in NY and San Francisco in the US, but we expect that to expand into many more cities in 2015."
The Chinese are also flocking to buy properties a little closer to home, in Tokyo – as the Japanese yen continues to sink, Chinese investments into real estate in neighboring countries almost reached $230 million in 2014, tripling the amount from last year. But how is it that the Chinese are now driving real estate prices globally? Analysts say it’s a combination of three factors – the policy push from the Chinese government to diversify into other countries; a softening domestic market; and the lure of higher returns achievable in overseas markets. Some market watchers warn, however, that due to the policy-driven nature of the Chinese market, there remains a risk that China’s outward investment could be impacted by policy adjustments. Dr. Nick Axford, Head of Global Research CBRE, is among those who expect a surge of Chinese outward investment in overseas real estate to persist.
"I think that clearly with the Chinese economy slowing slightly, and particularly Chinese real estate market slowing, wealthy individuals will be looking to diversify their investments, and to the extent that they can move capital out of China they’re probably going to continue to look for these types of opportunities."
So more of China’s burgeoning mega-rich will be shaking up real estate markets in global-class cities where a Chinese presence had historically been scarce, thus taking advantage of the recovering economy in other parts of the globe.
