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Banned property sectors too much of a gamble for Chinese investors

This article appeared in our latest quarterly Indicators report, the real estate edition. To download the full report, click here

Our data on deals recently completed shows that China, which had been experiencing a long-term growth trajectory in Australian deals, has now had two consecutive quarters of reduced interest across all sectors – at less than half the levels seen previously.

As a result, China now represents just c.3% of all offshore interest, which is much lower than that seen across 2016.

So what’s the story?

Capital controls put in place by the Chinese government last year are having an impact, with strict restrictions imposed on outbound investment from August 2017. The industry where this change is particularly pronounced is real estate, where property areas – including casinos, hotels and resorts – are now completely off limits to investors.

The regulations are intended to take some pressure off the Chinese banking system; bank lending makes up the majority of financing, according to data from the People’s Bank of China.

Only time will tell what the ultimate impact on the Australian property sector will be, and if the restrictions will boost China’s economic health, but one thing is certain: Chinese investors are being much more careful about their overseas activity.

 

To download the full second issue of the Indicators report, click here

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