The Growing Negative Speculation About China & The Global Real Estate Market
Real estate development has always relied on a steady flow of investment capital. In the past, China & The Global Real Estate Market have had somewhat of a cozy relationship with Chinese investors, providing significant capital to real estate developments. Unfortunately, there are many real estate experts that feel that this outbound investment capital from China could become limited in the future and there are financial experts that agree.
More Scrutiny From China
In recent days, The Peoples Bank of China, China’s National Development and Reform Commission, as well as the State Administration of Foreign Exchange, have all come out and stated that past regulations for outbound capital from Chinese investors will remain static. However, while the rules allowing Chinese investors to bring Chinese Capital to real estate acquisitions are staying the same, each of these organizations, along with The Ministry of Commerce in China, have said that more scrutiny will be given to real estate investments abroad.
Recent Chinese Investment Acquisitions
This has made real estate developers around the world, especially in the US, a bit nervous. The fact is that International Real Estate Investments provided by Chinese investors have been quite significant over the past few years. A good example of this is the Chinese development company Greenland, which is currently spending over $1 billion to add new features to the skyline of downtown LA. Another example is Anbang Insurance, a Chinese insurance company that made headlines in 2014 by purchasing the Waldorf Astoria Company for $2 billion.
Holding Up Future Real Estate Developments
US, as well as Global Real Estate developers, fear that more scrutiny is just the beginning. Many experts believe that China is simply taking time to rewrite more stringent restrictions on outbound capital. While real estate developers don’t worry that Chinese investors will be barred from investing capital in global real estate, the fear of more restrictions could still have a negative outcome. This could lead to longer periods of time taken for Chinese investment money to be approved and to flow into development projects. This could slow development significantly.
There’s a great deal of speculation and not a lot known about any possible restrictions the Chinese government may make to outbound capital. Some have hinted that there will be significant scrutiny for investments over $10 billion. Some have suggested that the number could be even lower, bringing more scrutiny to investments that reach a billion-dollar threshold. The silver lining in all of this is that 70% of Chinese investment capital in real estate typically falls under the billion-dollar threshold. This could mean that outbound Chinese capital for real estate investments will largely remain unchanged and untouched by increased government scrutiny and regulations.
The fact remains that potential developments in MT Real Estate Arizona, or other real estate developments throughout the world, have already begun to feel the effects of potential tightening regulations. Purchases by Chinese investors fell to $1 billion in October. This is a stark contrast from the $20 billion of investments made by Chinese investors in September.
How recent events involving China & The Global Real Estate Market plays out, and how much it actually affects the flow of outbound Chinese capital to real estate development around the world, is yet to be seen. With fearful speculation, and the fragile temperament of the real estate investment market in general, the stage has been set for an interesting global real estate market in the coming years.