Chinese interest in global safe-haven property rises

Residential property in Sydney, Australia. Realtors in Australia, Britain and Canada are preparing for a surge of new interest in their already-hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the tu
Residential property in Sydney, Australia. Realtors in Australia, Britain and Canada are preparing for a surge of new interest in their already-hot property markets, with early signs that wealthy Chinese investors are seeking a safe haven from the turmoil in their domestic equity markets.PHOTO: BLOOMBERG

Investors fleeing storm in China stock markets park funds in overseas real estate

SYDNEY/LONDON • Realtors in Australia, Britain and Canada are bracing themselves for a surge of new interest in their already-hot property markets, with early signs that rich Chinese investors are seeking a safe haven from the turmoil in their domestic stock markets.

Sydney realtor Michael Pallier said in the past week alone, he sold two new apartments and shown a A$13.8 million (S$13.9 million) house in the harbourside city to Chinese buyers looking for an alternative to stocks.

"A lot of high-net-worth individuals had already taken money out of the stock market because it was getting just too hot," said Mr Pallier, the principal of Sydney Sotheby's International Realty. "There's a huge amount of cash in China and I think you'll find a lot of that comes to the Australian property market."

Chinese shares have lost about 20 per cent of their value since mid-June, although attempts by the authorities to stem the bleeding are having some effect. Many wealthy Chinese investors had already cashed out. Major shareholders sold 360 billion yuan (S$78 billion) in the first five months this year alone, compared with 190 billion yuan in all of 2014 and an average of 100 billion yuan in prior years, according to Bank of America Merrill Lynch.

While much of that money may initially be parked in more liquid assets like US Treasury bonds and safe-haven currencies such as the Swiss franc, there is growing evidence that foreign property sales may receive a boost.

"There is anecdotal evidence that Chinese buyers have intensified their interest in 'safe haven' global property markets, including London, as a result of the recent stock market volatility," said Mr Tom Bill, head of London residential research at Knight Frank.

Mr Ed Mead, executive director of realtor Douglas & Gordon in London, said his firm had seen two buyers from China looking to purchase whole blocks of flats. "It is unusual to see the Chinese block buying, it implies that this is a capital movement rather than just individuals looking to park money."

Since 2000, China has had the world's largest outflow of high-net-worth individuals. Around 91,000 rich Chinese sought second citizenships between 2000 and 2014, according to a report by residence investment broker Lio Global, a factor that is fuelling demand for foreign property.

Most of these individuals, defined as those with net assets of US$1 million (S$1.3 million) or more excluding their primary residences, are moving to the United States, Hong Kong, Singapore and Britain.

Mr Brian Ward, president of capital markets and investment services for the Americas at Colliers International, said Chinese investors had sunk around US$5 billion into property in the US in the first six months this year, more than the US$4 billion they invested in the whole of 2014.

In London, Mr Alex Newall, managing director of Hanover Private Office estate agents, said he had seen an increase in interest from Chinese investors at the top of the market, although no transactions yet. "They're wanting to try and park large sums of money - from £25 million to £150 million (S$52 million to S$314 million). They're looking to park that capital in London homes," he said.

Australia and Canada are also rising in popularity, gaining an edge from their weakening currencies. "Property prices are still cheap in (yuan) terms," said Mr Timothy Cheung, a principal of Morphic Asset Management in Sydney.

Some, however, are concerned that Chinese investors who did not bail out of stocks quickly enough will be a drag on global property markets, particularly after Beijing last week banned shareholders with large stakes in listed firms from selling for six months.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 13, 2015, with the headline 'Chinese interest in global safe-haven property rises'. Print Edition | Subscribe