Insights

World’s biggest real estate buying binge predicted

Global property markets could be facing the biggest ever wave of overseas residential property investment, experts predict, as Chinese buyers focus on foreign markets. While Japan had a similar property boom in the 1980s, these purchases mainly focused on commercial buildings.

Chinese individuals have managed to accumulate large wealth holdings, but are faced with few investment opportunities in their domestic market. As a result, they are increasingly looking to abroad.

Today’s Chinese buyers have several reasons to invest in offshore properties. The weakening yuan is eroding their purchasing power, while the returns on local financial assets are declining as China’s economy slows. Furthermore, residential property prices in cities like Beijing, Shanghai and Shenzhen have risen by more than 30% in the year to September, making Chinese real estate increasingly unaffordable for local buyers.

With domestic properties so expensive, Chinese buyers are realising they can get more for their money in overseas real estate markets.

Prime global cities like Sydney, Vancouver, Hong Kong and London have long been popular destinations for Chinese buyers. However, these traditional hotspots are starting to lose their appeal, as prices soar and new taxes aim at deterring an influx of foreign investment.

“In the US, Chinese buyers are increasingly searching for properties in Houston, Orlando and Seattle.”

As a result, buyers from China are now venturing further afield than ever before, buying properties beyond these traditional hotspots and moving to lower-priced markets.

In the US, Chinese buyers are increasingly searching for properties in Houston, Orlando and Seattle. Countries in Southeast Asia have also grown more popular, with Thailand surpassing Britain as one of the top five most-searched destinations this year. In Pattaya Beach, Thailand, Chinese investors bought 20% of the luxury condos on offer over the past year. These properties offer ocean views for as little as $120 000 (R1.7m) – less than a quarter of the cost of a typical central Shanghai apartment.

This offshore buying spree defies Chinese government attempts to restrict capital outflows and shows little sign of slowing, An estimated $15 billion of overseas real estate purchases were registered during the first half of 2016 – almost as much as the outflows during the whole of 2015.

It is anticipated that this year’s massive offshore property purchases could be just the tip of the iceberg – with industry experts predicting that Chinese holdings of global real estate, including commercial properties, will probably rise to $220bn (R3 136bn) by 2020 from $80bn (R1 140bn) last year.