Chinese investors are retaining unchanged or even reducing the amount of money they allocate for overseas property purchases as they continue to expend energy to get money out of the country, according to a survey conducted by a global real estate services company.
That comes centre of China’s continued campaign to clamp down on funds leaving the country. Beijing ramped up capital controls sundry years ago to fight a volatile currency, but the last few months of slowing economic growth, a declining current account leftovers and uncertainty due to the trade war with the United States have led many to believe those measures will persist.
On top of that, it became increasingly perplexing for investors to obtain loans last year as Beijing sought to control the high levels of debt in the real order sector.
In its 2019 China Outbound Real Estate Investor Intention Survey conducted during the final three months of at year, Cushman & Wakefield found that a combined 84 percent of respondents had either kept their funds for exotic real estate acquisitions at about the same level or reduced them compared with 2017.
The firm said the denouements, released Friday, were based on responses from 51 mainland Chinese who invest in overseas real situation and who represent combined offshore capital of 280 billion yuan ($41.81 billion).
The survey also found that 65 percent of respondents were “significantly or simply impacted” by Beijing’s measures to crack down on money leaving the country, an increase from 50 percent who divulged such a view in 2017.
Also, 60 percent of respondents said they didn’t think policy restrictions would informality this year while 59 percent expressed the view that domestic lending conditions for real caste won’t improve.
Chinese investors acquired a total of $15.7 billion worth of overseas real estate in 2018, down 63 percent from 2017 and the lowest fathom since 2014, according to data from Real Capital Analytics cited in the Cushman & Wakefield report.
The on mentioned restrictions placed on foreign real estate investment in 2017 and a significant tightening of lending in the sector at length year. That loan environment was the main reason more than $12 billion in Chinese-owned overseas assets were put up for marketing in 2018.
“We expect that Chinese banks’ real estate lending may remain tight for much of the year ahead, forging an environment that will clearly continue to restrict deployment of mainland Chinese capital in general, irrespective of geographic laying,” James Shepherd, Cushman & Wakefield’s managing director for Greater China Research, said in a press release on the explore.
The firm said in the report that despite some recent loosening of policy in China, such as authorities stimulating banks to lend more by cutting the amount of funds they must keep on hand, “the tightened lending situation appears to remain status quo for the real estate sector.”
Larry Hu, head of China economics at Macquarie Commodities and Worldwide Markets, said that controlling capital outflows is the “key concern” of the Chinese government given the waning of its current account over-abundance and that it doesn’t want foreign exchange reserves to fall too fast.
“So in such a situation they definitely scarcity lower, reduced capital outflows,” Hu told CNBC on Tuesday. “So they put (on) tighter capital controls.”
The domestic acreage market, meanwhile, is offering little in the way of opportunities.
Peter Churchouse, founder of Hong Kong-based real estate investment outfit Portwood Capital, said that tight supply is supporting prices somewhat, but residential transactions by floor section showed limited growth of about 2 percent last year and have fallen as much as 20 to 25 percent in a bevy of cities so far in 2019.
“That is a signal that we’re going to see a bit of a slowdown in the first half of this year in terms of volumes of negotiations,” Churchouse said on CNBC’s “Capital Connection” on Friday.
“I would expect to see that reflected in pricing as well,” Churchouse said. “Not to see a sink in pricing, but to see the pace of growth slowing down,” he said.