China's canniest investors are withdrawing their money from the domestic property market as it suffers its worst slump on record.
The decision of some of China’s leading investors to withdraw huge sums of money from the country’s property market would appear to be vindicated as it post its worst performance since records began.
According to figures from China’s National Bureau of Statistics home prices fell in 64 of the 70 cities included in its survey in July – the largest proportion of declines in a single month since the survey commenced in July 2005.
Property prices in China have now fallen for three consecutive months, while the latest 0.9 per cent month-on-month decline posted in July marks the largest monthly fall.
Residential property sales also fell 17.8 per cent in July compared to the same period a year ago, while inventories of unsold properties held by developers are up 25 per cent.
Some of China’s canniest investors had the prescience to see the slump long in advance.
Hong Kong tycoon Li Ka-shing, who has long held the title of the richest ethnic Chinese in the world, offloaded property holdings in mainland China and Hong Kong worth as much as $3.5 billion in just the past year, via flagship investment company Hutchison Whampoa and other partially owned real estate struts. Analysts believe that the sales serve as an emphatic sign of Li’s intention to reduce his levels of exposure to Chinese property.
Other top investors are now shifting their property investment ambitions to other parts of the world, including the shores of Australia.
Wang Jianlin, the richest man in mainland Chinese and chairman of the Wanda Group, recently revealed his decision to invest $1.7 billion in Australian property. Wang’s real estate ambitions Down Under include the construction of a massive beachfront resort on the Gold last, worth an estimated $900 million.
Other real estate developers in China are now following the example made by investment luminaries such as Li and Wang, dialling down new investments in response to demonstrable signs of a property slump. Property investments increased by 13.7 per cent in the first seven months of the year down compared to the figure of 14.1 per cent logged for the first half.
Time can only tell, however, if the decision by Chinese tycoons to withdraw from property on their home turf is a prudent long-term move. Many analysts believe that Beijing will prop up the real estate market before the year ends via growth stabilisation measures, including reductions in mortgage lending rates as well as the percentage of deposits that commercial banks are required to hold with China’s central bank.