Will Chinese real estate investment continue to boom?

Investment in hotels, offices and land accounted for 90 per cent of all outbound Chinese capital from 2014-16, including the acquisition of the Waldorf Astoria New York for $1.95 billion by Anbang Insurance Group, the highest price ever paid for a hotel. This rush to buy real estate has caused concern for Chinese authorities who late last year reiterated the long-established restrictions imposed on Chinese residents investing overseas in a bid to stave off capital flight amid a faltering domestic economy, as well as to prevent money laundering.
The level of oversight intensified in January when four agencies, including the People’s Bank of China and the State Administration of Foreign Exchange, jointly announced they will more closely scrutinise local investment in international real estate and other sectors.
These controls will likely see Chinese investment in global real estate decline this year. Individual buyers of foreign exchange must now sign a pledge that they won’t use their $50,000 quotas for offshore property investment and this is impacting booming property markets in Australia, Canada and Britain.
However, up to now the property market in Thailand hasn’t attracted much speculative investment and so it may not be greatly affected. Chinese buyers in Thailand have mainly focused on property development projects or holiday homes in popular tourist destinations such as Chiang Mai, Pattaya, Bangkok and Phuket.
Indeed, the Chinese government is actively encouraging investment in industrial parks and logistics centres, as part of the Belt and Road Initiative. This is an opportunity for Thailand and in June last year Deputy Prime Minister Somkid Jatusripitak made an official visit to China when he wooed Chinese investors with the “super privileges” that will be available in the Eastern Economic Corridor, including 26,000 rai of land which has been set aside for targeted industries.
There has also been a trend for Chinese investors to look for condominium properties in business areas such as Bangkok’s Ratchadapisek district. As noted in a previous column, this marks a shift from previously popular neighborhoods around Sukhumvit, Sathorn and Lumpini Park.
Given that most Chinese buying property in Thailand are small-scale investors or property developers, they are less likely to have their purchases blocked by Beijing, which is more concerned with outright speculation.
Local property developers and estate agents should, however, note how they can better connect with individual buyers and smaller institutional investors from China.