One in 3 super rich people in China has built their wealth via real estate. Based on a report published by UBS, Chinese wealthy family are much more keen to invest in real estate compared to their global peers.
There are several reasons for this.
Real estate is one of the few assets which are tangible. Many Chinese in previous generation grew up in very poor circumstances. Most people didn’t know anything – let alone a house. This has now changed drastically with Chinese being able to buy real estate in their country (although technically it is still only a lease for a period of time).
Real estate market in China has skyrocketed. Many Chinese have seen how prices have gone quickly and have started put all their savings in real estate investments.
The fact that there are actually not many other assets available to invest in has significantly helped real estate investments. In the western world, people can easily invest in stocks, bonds, ETFs and other sophisticated financial products. This is still not the case for China (albeit it is improving) so Chinese tend to rely on real estate for their investments.
Lastly, many Chinese (especially the wealthy one) are keen to look at buying overseas real estate as this would offer a lot of advantages. It would allow them to diversity their portfolio much more, own assets outside of the reach of the Chinese government, and often it is their first step to a foreign passport. An important fact that is driving Chinese to buy houses in other countries is their desire for better education and better living. More than 1mm Chinese students are leaving China every year to go study overseas and many of the parents are buying a condo or house for these kids instead of paying rent.
The coronavirus has put all real estate investments on hold (whether it is domestic in China or overseas). However, this same virus may actually accelerate the overseas real estate investments as many Chinese have serious concerns about the state of the local healthcare system and the way that the Chinese government has been trying to manage the situation.
To read more about how Chinese spend their billions, you can find more details here.
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