Friday, July 2, 2010

China's property buyers go global

With yuan's value set to rise, affluent Chinese are turning to foreign markets like S'pore and London

LONDON: China's notorious property bubble could become its next big export, with a stronger yuan giving the newly rich the buying power to splash out in the world's most sought-after property markets.

Buoyed by hopes of gains in the yuan after its peg to the United States dollar was shed on June 19, Chinese investors are chasing discounted apartments from London to Singapore with a view to reducing their exposure to an overheated domestic market.

A report by property broker DTZ in late May showed that Chinese buyers made up 17 per cent of foreign property purchases in Singapore in the first quarter, making them the third most prolific overseas buyers in the city-state.

'They want their capital to be global... It's a kind of diversification of risk,' said DTZ's head of consulting for North Asia Alva To.

Despite its vast state wealth and status as one of the world's strongest economies, China has so far been eclipsed by Middle Eastern investors, private equity funds and other sovereign buyers from South Korea or Singapore in terms of influence on overseas real estate markets.

Chinese property investors have so far mostly confined their acquisitions to domestic markets, pushing average prices up by 77 per cent in five years and forcing the government to enact tough measures to keep homes affordable.

With property tightening measures at home and the yuan's value set to firm, analysts see more buyers branching out into overseas markets that promise attractive gains with fewer restrictions.

'The whole economic situation (in China) is prone to change, and so people are looking for a safe haven for their money,' said Mr James Moss, managing director of upmarket British real estate services company Curzon Investment Property.

He disclosed that his client base was now 75 per cent Chinese, from 95 per cent expatriate British investors five years ago.

China abandoned a 23-month-old peg to the US dollar earlier last month and, even though analysts do not expect the currency to be fully convertible any time soon, further appreciation is likely, boosting the overseas purchasing power of Chinese investors.

Data from real estate broker Knight Frank showed more than one in 10 new residential properties in London were sold to Chinese or Hong Kong buyers in the year to March, the highest share of the market by any offshore investors.

In Hong Kong, a fifth of luxury apartments are purchased by mainland Chinese, said DTZ's Mr To.

A relentless rise in domestic property prices since house ownership was legalised in 1998 has fostered a strong preference for bricks and mortar over volatile equities among the Chinese, already known as strong savers and investors.

'I'm looking for investment opportunities outside China to save enough money for my daughter when she grows up,' said Ms Tracy Ma, 38, a Chinese executive who owns an apartment in Shenzhen in China's south, neighbouring Hong Kong.

China's gross aggregate savings rate now tops 50 per cent of gross domestic product, by far the highest of any big economy, with disposable income among the urban population rising 10 per cent last year, official data showed.

More than 90 per cent of China's households own the home they live in, while more than a quarter own a second property, a report from Asian brokerage CLSA said.


Source: Straits Times, 2 Jul 2010

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