With China’s Real Estate Market Remaining Murky, Buyers Continue to Go Abroad

Shanghai's Lujiazui financial center. (Shutterstock)

Shanghai’s Lujiazui financial center. (Shutterstock)

With the state of China’s real estate market remaining something of a mystery for outside observers, one trend that has become crystal clear in recent years is that Chinese investors are on the warpath worldwide, snapping up trophy properties in the United States, Europe, and Australia as the country’s individual affluent buyers continue zeroing in on luxury properties of their own.

But the international attitude of China’s real estate investors doesn’t mean the property market within Greater China is dead. As a Forbes contributor notes this week,

Hong Kong housing equity started off the month of May hitting a fresh one-year high. It also has Shanghai housing prices on the upswing despite a sales decline.

Going further, Forbes points out that the property markets in the “big two” cities of Beijing and Shanghai are showing signs of life, with sales of new homes surpassing the “magic” 300,000-square-meter mark for two weeks in a row. According to Shanghai real estate pros, anything above this mark is a positive signal to buyers in that particular market. In Beijing, the market is less buoyant, but remains above the 300,000 mark, with new residential property sales dropping 13 percent in the last week of April to 325,200 square meters. For all but China’s super-rich, local properties—or maybe those in Hong Kong—are as good as it gets, as it’s difficult for them to purchase overseas properties.

However, the story is different for major commercial investors in China. Cash-flush and overexposed within their home market, Chinese companies are spending lavishly on properties in New York, Boston, London and elsewhere, acquiring high-profile real estate that diversifies their assets and spreads out the risk while also giving them bragging rights and prestige at home.

That said, the story in the China market is always more complicated than rough figures indicate. According to the Taipei Times, for more than a year, property prices have dropped in 70 Chinese cities, and sales have dipped for 11 of the last 24 months. Although the situation is expected to improve, the confidence level of many Chinese property buyers has taken a hit, a contributing factor to their interest in international property—if they have the means to obtain it.

In recent years, this has meant that real estate brokers in virtually every major city worldwide have had to work on new ways of attracting these buyers. Jing Daily’s latest report, “The Global Chinese Property Hunt: What They’re Buying, Why They’re Buying, and What it Means for New York,” recently highlighted some of these trends, which range from the simple (Mandarin-speaking staff) to advanced (knowing the types of properties Chinese buyers gravitate towards, and the general price ranges).

According to the report, Chinese purchases of  international real estate in the year to March 2014 equaled $22 billion, up from $12.4 billion the previous year. Within the United States, just under one in four dollars spent on international real estate is from a Chinese person. And the Chinese are making waves in quality, not just quantity. The median home price for Chinese buyers is $523,148—more than double the median home price across the United States as a whole.

Will this surge in international buying continue? All signs point to yes. Compared to prices in Beijing and Shanghai, half a million dollars doesn’t look that expensive to many of China’s more affluent buyers–particularly those interested in having their children educated abroad and diversifying their assets.

To learn more about China’s outbound real estate investment boom, purchase Jing Daily’s newest report “The Global Chinese Property Hunt: What They’re Buying, Why They’re Buying, and What it Means for New York” here.

 

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Investment & Real Estate