New York house prices up 35% in 12 months
It is no secret that the US economy has been struggling to pull away from the ongoing worldwide economic difficulties but it is also no secret that Chinese property investors are looking overseas for their future exposure. In what many believe is a consequence of changing Chinese government policies with regard to property ownership and real estate markets, a phenomenal $164 billion is expected to flow out of the Chinese real estate market into foreign investment in the short to medium term.
One example of how Chinese property investors are impacting overseas markets can be seen in New York which has seen property prices increase dramatically over the last two years. Indeed a 35% rise over the last 12 months alone is pushing US real estate prices back towards their peaks of 2006 – just prior to the US mortgage crisis.
Commercial and personal investment
Each day seems to bring new stories of multi-million dollar property investments on behalf of Chinese investment companies and high-profile Chinese business entrepreneurs. Indeed Zhang Xin the chief executive officer of SOHO China (one of Beijing’s larger real estate developers) has just acquired herself a $26 million home in Manhattan. This comes hot on the heels of a $700 million investment in the General Motors building in New York earlier this year.
Quote from PropertyForum.com : “Has anyone looked at Invest US and can they offer any words or wisdom. I have looked at this and it would appear to provide very good returns – can anyone think of a good reason why I shouldn’t invest?”
This is just the tip of the iceberg with millions upon millions of dollars pouring out of China into the US, Europe, South America and many other areas of the world. It is also worth noting that many governments across Latin America are also financially dependent upon the Chinese authorities, and high-profile Chinese banks, in the short to medium term. The influence of China seems to be radiating out of the country and into other areas of the world despite the fact that many home markets operate under severe restrictions.
Will the trend continue?
Despite the fact that some experts believe that property prices in some areas of the US, most notably New York in this instance, have moved too far ahead, Chinese investors are only now beginning to come to terms with the particular characteristics of the US real estate market. It therefore seems highly likely that the ongoing influx of Chinese funded property/real estate investments will continue perhaps at the expense of the Chinese property market?
Yes, while much of the focus today is upon Chinese investors looking overseas there are growing concerns that the so-called Chinese “property bubble” could burst in the short to medium term. The government has been attempting to manipulate and manage the property market over the last few years although unfortunately the continuous wave of investment funding has made this very difficult. Therefore the authorities have been forced to bring in more and more restrictive policies forcing many investors to look to foreign lands.
Conclusion
The influence of Chinese real estate investors across the world is there for everyone to see and is likely to continue in the short to medium term. Changing property dynamics in China are forcing more and more investors to look elsewhere with huge sums expected to leave the country in the short to medium term, with some estimates as high as $164 billion. It will be interesting to see at what level Chinese investors start to look elsewhere outside of the US and indeed which markets could be next on their radar.