Will the Chinese Always Invest in Real Estate?

Wednesday, March 21, 2012 11:05

With Bejing’s measures to cool off the economy have gutted out a number of developers recently, a few have seen this as an opportunity to continue looking for investments.  The Singaporean group Capitaland being one of them, and in the recent WSJ piece CapitaLand Sees Plenty of Spark in China, its CEO Liew Mun Leong is interviewed about his thoughts on investing in China.

To which he opens with:

“Urbanization and economic growth will support demand, and the Chinese people love to buy their own homes,” [..] “Also, there’s no alternative class of investment—they can’t invest outside of China, they don’t understand anything about equities, but they understand how to buy an apartment.”

An interesting way of profiling the Chinese investor to say the least, and while historically I would agree to the extent that the Chinese relationship with real estate is rock solid, I am not sure I agree that the condition as he presents accurately reflects the average investor anymore.

Sure, real estate is likely to be the first major investment, and yes, this investment will likely come as a result of the investor’s familiarity of real estate matched with the practical fact that urbanization is driving new buyers into the market (be it young professional, newly wed, etc)… but the Chinese have over the last few years shown that they are also avid investors in other asset classes.

Overseas real estatePrecious metals. Agricultural products. Wine

So, is Leong right? Are the Chinese ignorant of alternative investments, or unable to otherwise execute the deal?

Or is the recent trend of Chinese looking elsewhere to place there money a threat to his model, and the market for investment properties in general, in trouble?

Both comments and pings are currently closed.

One Response to “Will the Chinese Always Invest in Real Estate?”

  1. Chris Devonshire-Ellis says:

    March 25th, 2012 at 5:45 am

    Leong is right, the focus on this being ‘there’s no alternative class of investment”. While that continues the Chinese can only investn in property. Beijing needs to free up it’s capital account, liberalize its financial markets and free up the trading of the RMB to properly address this issue. Until they do that the Chinese can only invest in one thing – real estate. Beyond that, its stocks and shares, and expensive luxury items from Ferrari’s to LV bags to French wine – the luxury market in China itself is experiencing a bubble. – CDE