Will Chinese buyers return to overseas real estate markets?
Discover how the Chinese mainland’s property downturn reshapes the focus of Chinese buyers
2 minutes to read
The global focus has been on Chinese property buyers for the past decades, but things could start to evolve given the slowdown in Chinese mainland’s property sector.
Property used to be the most favoured investment for wealth accumulation. Many Mainland Chinese invest as much as 70% of their savings in domestic and international real estate. For instance, small apartments and condominiums in Southeast Asia were a popular choice for the Mainland Chinese middle classes in the late 2010s due to affordability and geographic proximity. Top destinations also include Australia, the UK, and the US.
Amid a bumpy post-pandemic reopening recovery, a prolonged domestic property crisis, and dwindling growth of household wealth, some have struggled with worsening financial conditions. The prevailing economic uncertainty has led many Mainland Chinese to adopt a more conservative approach, curbing domestic home purchases and overseas investments.
China's property sector witnessed significant expansion from 1998 to 2016. However, policy changes aimed at curbing speculation and improving affordability have contributed to the current downturn. The accumulation of substantial property-related debt, which reached approximately 55% of China's Gross Domestic Product by late 2020, has further exacerbated the sector's challenges.
In 2023, total sales of China’s top 100 developers were down 17.3% to CNY 6.3 trillion (USD 879 billion) from a year earlier as property companies grapple with a liquidity crisis. The slowdown has been a major blow to consumer and investor confidence. Despite governmental efforts to revive the market by reducing interest rates and down payment requirements, their impact has been muted.
Amid this challenging landscape, Chinese buyers in the overseas market have become more selective. Southeast Asia, especially Thailand and Malaysia, has witnessed a decline in favour. In contrast, Japan and the UAE saw increased activity among Chinese buyers, while Australia remains the top choice for overseas property purchases. The trend is expected to continue into 2024.
A substantial recovery hinges on a resolution of the credit crisis, though we still expect opportunities to emerge across the risk spectrum, particularly within private credit and government-approved sectors such as logistics and data centres. Any pick-up in economic momentum could be swift, given the government’s recent shift towards a more accommodative stance and the rollout of policies aimed at kickstarting growth.
For more insights on our latest edition of The Wealth Report, please click here: https://www.knightfrank.com/wealthreport.