The Chinese government’s scheme to begin allowing citizens to invest directly in overseas markets, including Australia – known as QDII2 – was announced in May this year. While the first scheme was limited to institutions, QDII2 is open to individual investors and has the potential to significantly disrupt overseas property markets.
Property search giant Juwai.com estimates QDII2 – if rolled out nationally – could theoretically deliver as much as US$2.3 trillion to international residential real estate markets alone.
“The likely amount is probably closer to US$661 billion,” Juwai’s co-CEO Simon Henry said. “The latter figure depends on a reasonable estimate that wealthy Chinese individuals allocate approximately 10 per cent of their total assets to international real estate, both commercial and residential.”
Juwai.com estimates the United States will see the greatest share of new investment, with an expected $109 billion, followed by Australia with $76 billion.
Mr Henry said that according to data from Juwai.com, Chinese interest in Australian property is up by 35 percent month-on-month.
“There's a large degree of monthly variation in the data, but the trend seems pretty clear and it shows a steady and stable increase over time,” he said.
"Chinese buyers are getting more and more comfortable. Some are seeking bargains by looking at Brisbane instead of Sydney and Melbourne. Others are doubling down on the two big cities. Overall, the market continues to grow as new Chinese buyers begin to participate in international property investment for the first time.
“There is huge growth ahead as China liberalises its capital export rules."
The People’s Bank of China last week moved to devalue the renminbi, igniting concerns about increasing global deflationary pressure.
Commenting on the Chinese currency movements – which AB (formerly AllianceBernstein) says devalued by 4.5 per cent over a three-day period – Mr Henry said Chinese purchasing power is still up nearly 20 per cent over the past year, and the recent currency fall has been pretty small in comparison with the run-up in value.
“We don't see any impact so far,” he said. “Bloomberg asked us to check the stats the other day, and we found that property hunting on Juwai.com was in the normal range in the days after the announcement of the depreciation. No change."
If Chinese investors begin parking their money in Australian residential property, the opportunities for financial services are huge, Mr Henry says.
“We see a big opportunity for banking and financial services,” he said.
“It just makes sense to a buyer, especially one who will reside in Australia at least part time, to have local service providers taking care of their needs in the country.
“I know several institutions are going after this business, and there is room for them."