Foreign Buying To Accelerate If China’s Stock Market Crashes: Juwai

Foreign Buying To Accelerate If China's Stock Market Crashes: Juwai

Prepare for a major influx of foreign buyers if China’s stock exchanges experience volatility. That’s according to a survey conducted by Juwai, China’s largest overseas real estate firm. Chinese real estate agents believe stock market volatility will send their buyers searching for overseas property, primarily to diversify holdings.

China’s Agents Believe Buyers Will Look For Overseas Property

The survey, was conducted to determine buyer sentiment after the Shanghai Stock Exchange (SSE) experienced volatility in early 2016. They surveyed both mainland Chinese agents, as well as international real estate agents. On average, 55% of all people surveyed believed stock market volatility will increase foreign property buying from China.

Mainland Chinese Agents were mostly sure SSE volatility would lead to increased purchasing. 48% of respondents said there would be more buying, 40% said it would have no impact, 8% were unsure, and only 4% said it would result in less buying. One of the most cited reasons from Mainland Chinese agents was “it seems more stable to allocate overseas assets”.

Mainland Chinese Agents

International agents that specialize in Chinese buyers for overseas real estate were a little more split. 59% said there will be more buying, 19% were unsure, 14% said less buying, and only 8% said there would be no impact. One of the reasons most often cited from international agents was “investors will look for stability”.

International Agents

“Chinese investors will look for safe a haven for their cash, particularly in countries with stable political and economic conditions,” said one respondent.

Shanghai Returns vs. Buying

This did get us thinking. January 2016 was one of the most unstable months for the SSE, and the next month Vancouver real estate experienced its highest demand ever. So we thought we’d visualize the difference between the SSE and Vancouver real estate.

How closely does the SSE resemble Vancouver real estate demand? Pretty damn close. When graphed side-by-side, the absorption rate for Vancouver property spikes when there are drops in the Shanghai Stock Exchange, and vice versa. While correlation isn’t a fool proof way of predicting demand – it does lend a little weight to the survey.

Buyer intent isn’t as good as done, so the survey isn’t a sure indicator. However, a hit to the Chinese market is usually a hit to the Canadian stock market. This means Canadians could face economic difficulties, compounded by additional foreign buying. Rising prices are either a blessing or a curse, depending on whether or not you already own a home in Canada.

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