Ray White Commercial senior analyst Brendan Keenan put the inflow of Chinese capital into perspective this week, saying its scale & speed were unprecedented.
“In the last 12 months, over half of our business has come in the form of investment from high-net-worth resident & non-resident Chinese and Chinese investment companies. These groups have purchased 15 properties with a combined value of $249 million. In the 12 months prior to June 2013, only 22% of our business was from offshore, with none of our buyers originating from China.
“The driving forces behind this surge in investment seem to be mixed and not always motivated by pure financial decision-making. Similar to both the Australian asset grab we saw in the early 2000s and the South-east Asian investment boom during the 1990s, the current influx of Chinese investment is helping underpin growth across the Auckland property market.
“However, within certain sectors we are beginning to see a 2-tiered market develop, with offshore buyers paying a premium for landmark cbd sites, large residential development landholdings and, more recently, commercial investment property. Where previously there has been a collective industry notion of what an asset should be worth, these new entrants are blowing the traditional thinking on value out of the water and setting new pricing benchmarks.
“So what is behind this flood of capital? Lower gdp growth and the prospect of a property bubble are creating headwinds for the Chinese economy and making headlines, but equally important are new structural changes introduced in the last year aimed at making China a more open & transparent economy.
“Recent changes to outbound investment rules introduced in the last year aim to liberalise China’s economy, as the politburo tries to cool an overheated property market. Higher thresholds for foreign direct investment, less administration and eventually the full liberalisation of the yuan are making it easier to invest & diversify outside of China.”
Mr Keenan also mentioned Xi Jingping’s hard line on graft & corruption, unchecked pollution, a lack of access to high quality education, immigration decisions in other countries, and an overall climate of uncertainty for the rich in China.
Click the link below for the full story, and for Ray White Commercial Auckland managing director Bruce Whillans’ quarterly update.
Attribution: Agency market report.