Thailand is firmly in the sights of Chinese real estate developers who remain undaunted by the RMB’s recent devaluation.
The kingdom is ranked seventh globally by the amount invested by Chinese developers, according to data from Juwai.com, and have pumped US$34.6 billion worth of property investment into markets around the world in the year ending May 2015.
Even as mainland stock markets endure a bumpy ride, Chinese developers have been seeking to further capitalise on the ongoing global property market recovery by targeting China’s vast and ever-expanding market of overseas property buyers and tourists, and are expected to continue to invest in the coming years.
Since 2010, investment outflows from China have grown from a mere trickle to a steady stream. Total investment has steadily increased from US$2.5 billion in 2010 to hit US$11.7 billion in 2014 – a new record for outbound flows that is five times the 2010.
As investment has taken off, so has the footprint of developers’ projects, which have expanded across the globe. At the start of the surge in 2010, developers stuck close to home, favouring projects in Asia but within the past five years, North America, Europe, and Africa have begun to feature more prominently in developers’ sights, with those three continents accounting for 45percent of total project investment made by the end of May this year.
On a country level in terms of popularity with Chinese developers, the United States is the clear favourite, receiving US$10 billion of investment spread across 14 of 47 projects between January 2010 and May 2015. Australia and the U.K. followed in second and third positions with nine and four confirmed major projects, respectively.
These countries’ prominence in developers’ plans can be put down to a number of factors but, chiefly, they are the most popular destinations for residential property investors from mainland China, and this is not hyperbole. Juwai data showed that the U.S., Australia and the U.K. accounted for three of Chinese buyer’s top four most sought after locations in 2014.
So far, Australia has been the stellar performer for 2015 – accounting for three of seven announced investments and US$1.62 billion (27 percent) of US$5.9 billion in total outflows. This is in line with recent data showing a splurge of Chinese investment in commercial real estate.
Australia ranked highly for China’s property developers and its growing market of internationally-minded property investors. Even more so now that China and Australia have developed a Premium Investor Visa (PIV) – a one-year accelerated channel for foreign investors to acquire permanent residency, which greatly appeals to Chinese looking to emigrate. Australia also boasts excellent weather, quality education, and a well-established Chinese business community – all of which are key attractors to mainland property investors.
3 factors propelling outbound activity
With many active players, there are many motivations, with three in particular being:
The allure of overseas markets: Spiralling land prices and increasing taxation have taken some of the lustre out of China’s domestic real estate markets. In contrast, recovering markets of Europe, North America, and certain parts of Asia – as seen in Juwai’s Q1 Global Property Report – are registering strong price growth and look comparatively attractive.
Business diversification: Having all of your eggs in one basket is never a wise business strategy, so stretching operations to guard against market risk makes a lot of sense, given the frequent policy changes in mainland China.
Tapping into the flow of Chinese buyers: Chinese buyers are increasingly looking overseas, and well-known developers from China know this, hence the trend to begin targeting them more fiercely. These buyers are also often on the lookout for security, and under the belief that a known brand will more likely provide the assurance they need.
Underlying trends look solid for future growth
You can expect this story to continue running. For starters, 2015 has already got off to a strong start with total investments between January and May alone reached US$5.9 billion, up 22 percent year-on-year compared with the same period last year.
Also, as property demand recovers across the world, overseas assets are looking increasingly attractive to Chinese developer capital. More significantly, the Chinese government is pushing developers into global markets by relaxing policy controls and making it easier than ever to make outbound investments.
Finally, developers have been getting ready for a major push. Chinese developers tapped capital markets with total bond issuances exceeding RMB 200 billion (US$31.6 billion) which will be used to store up capital, ease debt financing burdens and fund overseas investments.
The Chinese are coming, and it seems not only buyers but developers too.
