In a trend that’s definitely impacted our property markets, the new class of millionaires are making their money in China, but investing it overseas. And many are following their money.
It’s one of the largest and most rapid wealth migrations of our time according to CNBC with hundreds of billions of dollars, and waves of millionaires flowing out of China to overseas destinations.
According to WealthInsight, the Chinese wealthy now have about $658 billion stashed in offshore assets.
Boston Consulting Group puts the number lower, at around $450 billion, but says offshore investments are expected to double in the next three years.
A study from Bain Consulting found that half of China’s ultrawealthy—those with $16 million or more in wealth—now have investments overseas.
And it’s not just the money that’s exiting the country. The wealthy are increasingly following their money overseas.[sam id=37 codes=’true’]
A study by Hurun and Bank of China found that more than half of China’s millionaires are considering emigrating or have already taken steps to move overseas.
Many experts say that the wealthy are moving to protect their wealth, their health and their families. With China increasingly cracking down on ill-gotten gains and corruption, many of the politically connected wealthy are looking for safer havens abroad.
They are also looking for better environments for their children—with better schools and cleaner air.
“Whether it is the perceived political instability or perhaps lack of educational opportunities, or pollution in the urban environments there, when you put those altogether … and you mix that with the wealth that’s present in China now, it really makes sense that there are folks there looking to explore these opportunities,” said Peter Joseph of the Association to Invest in the USA, which represents investor-visa programs in the U.S.
Some say the capital flight and millionaire migration are normal consequences of rising wealth. Oliver Williams, of WealthInsight, said that the Chinese wealthy have about 13 percent of their wealth overseas—below the global average of 20 percent to 30 percent.
Still, much of China’s offshore wealth is moved illegally or in the shadow economy. China maintains a closed capital account and Chinese citizens are generally not permitted to move more than $50,000 out of the country. So reliable data on exactly how much money is moving out remains unclear.
But the global buying spree by wealthy Chinese suggests the numbers may be far higher than reported. Wealthy Chinese buyers purchased more than $8 billion worth of residential real estate in the U.S. in the 12 months ended in March, according to the National Association of Realtors. China’s share of foreign-purchased residential real estate has jumped 50 percent since 2011.
Now I’ve read some interesting stuff recently, and in my mind the current fear that the Chinese might buy all our property is nothing but xenophobia but the trend is interesting and one all property investors should keep an eye on as I see foreign real estate investment in Australia and property investment through Self Managed Superannuation Funds as two significant forces that will underpin our property markets in 2014.
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