Some of the world’s most famous and iconic buildings now have one thing in common: they’re owned by Chinese investors. It’s true of the Lloyd’s of London building, of New York’s most famous hotel and of countless other premium properties across the world, but with a twin focus in New York and London.
This phenomenon is unusual partly because it’s so new. Until 2012 many Chinese weren’t allowed to invest in real estate abroad. Now that they are, their £1 trillion of assets is changing the shape of the world market. New York and London aren’t the most expensive real estate markets in the world, though they both make the top ten. What they do offer is safe-haven status for investors.
‘It's become a seller’s market now if you have a prime property,’ says David Green-Morgan, global capital markets research director at Jones Lang LaSalle. ‘The new [Chinese] investors have helped push the prices higher in the bigger cities.’
As new as the influx of Chinese money is, we’ve actually been here before, so we have some history to look to for a clue about how this will play out.
In the late 1980s and early 1990s, Japanese investors drew money from their burgeoning economy and invested it in US properties, with Japanese investors buying the Rockefeller Center among other landmarks. That boom ended when the bottom fell out of the US real estate market, forcing many Japanese buyers to sell at a loss. While it was on, it enriched some sectors of New York society while driving up rents and purchase prices. Is the same thing happening today?
Office prices in New York and London jumped by 11% and 15% in the nine months to September 2014, according to CBRE. Global commercial property transactions rose to $700bn last year, indicating a preference for commercial investment properties. But what effect will this have on residential prices?
Part of that question may be answered by the fact that a one-bedroom flat in London went on sale earlier this week for £10 million, located in Hyde One, the world’s most expensive block of flats. While this is a deliberately expensive prestige project (it even comes with SAS security protection!) it shows the effect of a rising commercial market on residential property. Part of the notoriously two-layered nature of the UK housing market is a result of the influx of Chinese investment cash, driving up land prices and increasing the general price of bricks and mortar.
What about in New York? Average prices in America’s unofficial capital jumped by 13% for residential properties in the third quarter of 2014 to $910, 000, and sales prices for Manhattan condominiums leaped to an average of $2.4 million in Manhattan, beating the previous year’s record of $2 million.
In both the USA and the UK, there’s a modest but genuine housing recovery going on in the background; but some of the extra equity in homes on both sides of the pond comes courtesy of Chinese investors looking for a safe place to put their dollars.
Written by Les Calvert of www.homesabroad.co.uk - overseas property reporter
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