A further $17.2 billion of Chinese money is expected to start pouring into the New Zealand property market as the Chinese government changes its rules on overseas investment

Property website Realestate.co.nz is expecting Chinese investors to pour US$10.9 billion (NZ$17.2 billion) into this country's residential and commercial real estate markets as a result of changes being made to overseas investment rules in China.

The latest Unconditional newsletter published by Realestate.co.nz this week, said the influx of Chinese money was likely to cause a boom in this country's commercial property sector.

"The second phase of Qualified Domestic Individual Investor programme implemented by the Chinese government will come into effect this month," the newsletter said.

"This programme removes certain restrictions that were placed on Chinese citizens and businesses from purchasing and investing in property overseas."

As a result, Chinese investors are expected to pour US$330 billion into overseas property investments throughout the world, and US$10.9 billion (NZ$17.2 billion) of that is expected to be invested in New Zealand.

"This forecast is based on New Zealand attracting approximately 3.3% of that property-specific investment, as it has in the past when similar percentages of the Chinese affluent have chosen to invest in property abroad," the newsletter said.

It says the local industry must prepare to welcome the rush of Chinese money.

"This welcome should be implemented on both the small and large scale; from employing realtors who are able to communicate in Chinese, to lobbying government to make the country more appealing to Chinese investors," the newsletter said.

"The government and big business should look to make relevant improvements to the national education system as well as increasing the number of direct flights to China," it said.

However it is not just real estate agencies that need to gear up to meet the demand for properties from Chinese investors, businesses offering related services such as insurance and legal services "...may well also be wise to adapt their business models and practices to appeal to the impending influx of expected Chinese buyers and investors," the newsletter said.

However it also noted there could be resistance to such a large amount of new money pouring into this country's property market.

"Not everyone is happy about this potentially huge influx of Chinese investment," it said.

"Other commentators have suggested New Zealand's infrastructure simply isn't set up for such huge property focus and development, nor is it in a position to change in the immediate future.

"There is also concern about the impact that such a huge amount of property purchases from overseas investors will have on a property market that is already over-stretched in some area, and how this will impact New Zealand citizens and existing residents that are looking to find properties of their own."

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment or click on the "Register" link below a comment.

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53 Comments

Greg, could you please provide a reputable link to the Chinese source affirming the statements Realestate.co.nz have made?

Realestate.co.nz say they are "expecting" a flood of money as the overseas investment rule will change this month.

Have you got cogent evidence of the new rule being implemented this month to support your article?

That is a link to more spin with no actual data from the Chinese govt that states WHEN the new programme will start. That link makes reference to the Juwai comments who said it would start soon and that was back in June. We are now 3 months later and where is the proof direct from the Chinese govt? These programmes started back in 2004 I believe....

I'm not saying that the information is incorrect, however I have seen nothing which supports it is true. At the moment it looks like more media propaganda to pump up a property market which may soon be in trouble.

Greg, I am still waiting for a link which cogently supports your statements in this article?

....so Greg, the truth is you actually have no evidence to support this article.

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21

Great. Hard-working kiwis will get shafted once again.

But hey, we get to choose a flag from the ones John Key's stooges picked so everything's ok right?

You're a joke New Zealand.

And don't forget there will be another Rugby World Cup in 4 years so the beehive can be put to good use again.

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17

Really? That equates to about 20,000 average Auckland houses or roughly two years worth of new Auckland houses. If this is true then our present problems are going to be dwarfed. If this happens then there is going to be one hell of a public backlash. Even if it is only 1/2 -1/3 true, the government would be wise to strongly head this off. Wise, that would be expecting too much.

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If that money could only buy new homes, our housing crisis would be solved pronto! But then the crisis is the reason they wan't to invest here right? Oh what a mess...

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'It says the local industry must prepare to welcome the rush of Chinese money"

Any Kiwi who thinks this is wlecome would have to be the most hollow, selfish, shortsighted, greedy, reckless, souless, uncaring treacherous and traiterous person i could imagine. How depressing reading this must be for our kids....

I guess I'm one of those kids...it is depressing...we moved to Australia and it would be economic suicide for us to move back to Auckland (as much as we'd like to one day)

Count yourself lucky! We're stuck in Auckland to care for sick family but we're desperate to get out!

Most kiwis I know who live overseas won't come back. New Zealand's changed - and not for the better.

Yep, that's the depressing part.

As a matter of fact we do count ourselves very lucky everyday - I hope your situation improves VA.

quote - Lobby government to make NZ more appealing to Chinese

Which is code for -

(a) we want their money
(b) new Zealand is not appealing enough
(c) we should adapt ourselves to their needs - and
(d) do not expect them to adapt to our needs

The newsletter says - local industry must prepare to welcome the rush of Chinese money. 'This welcome should be implemented on both the small and large scale; from employing realtors who are able to communicate in Chinese, to lobbying government to make the country more appealing to Chinese investors"

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It appears the only news we se in the media these days is about the property market and overseas investors. We would expect this kind of information being put out by the real estate chaps, they want the money go round to carry on and what better than saying billions more on its way. Create a flurry and get some more people to get desperate and buy into this super inflated market.
I know the Nats will not get my vote this term, will try and spread the word to as many people as possible. This government will be remembered for :
1. Causing and allowing the housing ponzi.
2. Flooding Auckland with migrants who have no hope of getting quality jobs as unemployment goes up in the coming months/years.
3. Claiming we have a quality education system for foreign students. Most of them pass out with degrees they cannot use here or in their home country and end up with huge student debt.
5. Selling state assets that should logically have been kept for future generations.

The only people they are fooling with "don't worry NZ is in good financial shape" is themselves, heads pushed so deep in the sand they don't want to hear the sound when this house of cards come crashing down.

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4. Extreme dirty politics, secret courts, extending GCSB and SIS powers, TPP, arrogant authoritarianism.

Interesting times. The media is full of very mixed messages of a Chinese economy in decline, world sharemarkets shakeyhttp://www.bloomberg.com/news/videos/2015-09-01/inside-the-uncertainty-a..., Europe with big problems and yet we are constantly lead to believe that we need to join the Auckland ponzi. Why we are trying to turn NZ into one big Chinese casino? Look at what has happened to most of the markets they have overblown. Let the money in I say, bring it on, stop the fear mongering.

When the Chinese stock market really crashes sometime in the next two months, we at least may get a reprieve from the kind of insanity allowing this type of investment brings.

Hopefully by the time they recover Key will either be locked out, or locked up.

Enjoying my ride in my ever increasing value. The glass is half full for me. How is it for you?

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... are you asking out of compassion? Suspect not, youre asking in order to inflate your own ego. Sad. You should be on a self help site, not a business site. Life is very unpleasant for many folk out there, and not for anything they have done or not done. Personally I am fine, but I care about the others - which was a NZ virtue once.

Since when do many business ppl care about others?

ie while I understand your best intentions and agree with you 100%, this site is not primarily a social concern site but about finance and making/losing money. In-directly looking after ppl can have business benefits but frankly I dont think many far right of centre care in the slightest.

Interesting comment Steven. But business does not actually operate completely in the self interest. Or even mostly in self interest. While we have the study of competition, it misses most of the point, because 90%+ of activity is co-operative.
If you believed that competition and self interest was the sole driver, then you would never get on a plane. The mechanic is paid to do the job, but mostly does it properly because he thinks he should.
Adam Smith saw that the butcher gave him a sausage because that is how he earned his living. And developed a whole economic lexicon from that observation.
However Adam never noticed it was his mother who cooked it for him. He never worked those factors into his view.

I did say "many" and not all do and I did say that some definitely dont care. Now sure they may also be ignoring the positive benefits of looking after others even when measurable, there are certainly sharks I think it would be foolish not to realise this is not the case.

You almost have it i think. All business is a societal phenomenon. Without society business's cannot exist, who would their market be? I agree that many far right business people (read very wealthy) see society as having to dance to their tune, and if they could, they'd have a monopoly that removed choice and gave them total control. However laws that promote competition, and fairness means that business's must consider the societies that they operate in. This is often tenuous as they avoid paying taxes, yet profit from the benefits those taxes deliver such as an educated workforce, infrastructure to get supplies, make their products, and deliver their services or products. This is where we, the people, rely heavily on our Governments to ensure our interests are properly protected. Something that most western Governments, if not all, so far do not have a very good report card on.

while businesses must place their own business concerns before any other consideration if they wish to survive, the next order of business is entirely customer driven. Without predicting customer desires, there will quickly be no business left.

agree

poor comment...

Enjoy the ride mate, enjoy it. You made the right calls and deserve all the equity that is showering on you. Forget about the haters. Plenty of bitterness from doomsters will be directed towards you because you dared to be successful.

So buying houses makes you successful? Too funny on so many levels, keep it up I enjoy your posts.

Trading in commodities that appreciate in value makes you successful. At the minute housing happens to be one of those commodities.

Speculating on property you mean , I am old fashioned and don't see housing as a commodity, unlike JK and National Flag wavers.

I'm glad you think of housing as a commodity market... so do I, just the same as any other commodity...

"Be Fearful When Others Are Greedy and Greedy When Others Are Fearful"

Gold
US$1,002/ounce - Sept 2009
US$1,838/ounce - July 2011
US$1,093/ounce - Sept 2015

Crude Oil
US$69/barrel - Sept 2009
US$114/barrel - April 2011
US$44/barrel - Sept 2015

Hope you enjoy your leveraged paper gains while they last. Commodities eh?

no. Having bought houses back when they were cheap makes you successful.

Lucky, not successful - successful people , Michael Hill, Sir Stephen Tindall, Rod Drury,Nadia Lim. These people create successful businesses, and employ lots of people and pay lots of tax. Property speculators/traders do none of that, rather suck on the teat of the rest of NZ.

agree, but such property ppl are after capital gains and are therefore not successful, ie they have done nothing to grow the value just used others money to speculate/gamble on the value going up.

Property is simply a speculative game for unsophisticated mugs.

That's all it will ever be.
If you're "successful" at speculating you are lucky, not skilled.

Yeah by outbidding potential home owner occupiers then renting those properties out to them as they can't afford to buy. That is the sort of success that needs kicking to the kerb, it is gross

Totally agree - must feel great when you are responsible for killing off the hopes and dreams of young families.

More $ coming to NZ is always great but the question is to whom?

Govt's job to make sure the benefit and cost are shared fairly. There are so many policies that Govt needs to think about right now before things get ugly.

They won't, John Key does his leading from the rear

All the bear's rejoicing about the Auckland property market witnessing a minor regression last month.

Interest rates falling (cheap mortgage rates, cheap to buy NZD), with a buoyant summer and plenty of Chinese money coming into New Zealand. Hold onto your hats guys... we're in for a big 12 months in Auckland !!

-the only reason investors "invest" in NZ property is because of the illusion that prices will continue growing.
-NZ is only an attractive market to invest in property while the bubble lasts.
-Many, MANY countries in the world have much cheaper and way better quality houses for sale, yet they don't attract foreign investors. For instance, Spain or Portugal grant residency to any foreigner who buys a house for more than 500k Euro and they can become citizens after 2,5 years in Spain and after 5 years in Portugal, yet that's not stopping prices from going down or attracting many investors and population keeps decreasing.

Investors look for capital gains. Burst the bubble or take advantage of speculation through capital gain taxes and other taxes and win win. And let the overseas investors risk their money in already overpriced assets, who cares? Or even better, only allow investments to build new houses, not to buy already existing houses. And quality ones, please.

My pockets are wide open and ready to be filled with fresh crisp Yuan. Welcome.

Make sure you're careful when pocketing it, the ink's still wet on those notes and you don't want it to leave a stain...

It is pretty obvious that there are not so many property bulls commenting on this site these days. That in itself is speaking rather loudly. Some of the bright ones would have sold or are currently selling some or all of their stock to lock in profits. The ones I know of in Auckland feel that it has reached tipping point up there and are certainly looking to lock in some profits and one can only do that when you sell.

So you're selling your portfolio? Why?

Bring it on but milk it for all we (NZ) can get by setting an eye watering stamp duty on buying existing dwellings for non citizens, with new build and commercial remaining duty free.

This article is sorta 'old news' and time has moved on. Across the AFR, WSJ, and FT were articles detailing how China is now imposing stricter capital controls to prevent the outward flow of capital.

Indeed - the AFR was warning of a rapid cooling as no longer have high levels of consistent foreign support for asset prices - particularly property.

mmm not so much WSJ http://www.wsj.com/articles/china-boosts-efforts-to-keep-money-at-home-1...

BEIJING—China is imposing fresh controls to prevent too much money from leaving its shores, escalating its battle against a deepening slump in the world’s No. 2 economy.

The country’s central bank said Tuesday that it will make it more expensive for investors to pressure the yuan to weaken against the U.S. dollar. A weaker currency generally prompts investors to look elsewhere to put their cash and would complicate the government’s efforts to generate spending and bolster economic growth.

Some of the country’s largest lenders, including Bank of China Ltd. and China Citic Bank Corp., are beefing up their internal checks on large foreign-exchange conversions by corporate clients, according to Chinese banking executives.

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Chinese companies can exchange yuan for foreign currencies only for approved business purposes, such as paying for imports or approved foreign investments.

Meanwhile, financial regulators, together with the country’s security forces, are stepping up efforts to rein in illegal money-transfer agents who make a living by helping people move money out of China.

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The efforts are meant to prop up the currency following the central bank’s surprise devaluation three weeks ago. They come amid signs that China—long a catch basin for the world’s money—is starting to see that money trickle out.

On Tuesday, official manufacturing data for August showed the lowest level of factory activity in three years, sending global markets lower. The Dow Jones Industrial Average tumbled 469.68 points, or 2.8%, to 16058.35.

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Reliable figures on fund flows are hard to come by because many investors move money out of the country in ways that circumvent China’s tough limits. Some investors have been moving money out of the country because of Beijing’s long-running anticorruption campaign.

Still, economists point to indications that money is leaving. China’s foreign-exchange reserves, which last year nearly reached $4 trillion, have shrunk by more than $341 billion since then.

Property-services firm CBRE Group Inc. recently estimated that Chinese investment in overseas commercial properties, which is a proxy for outbound residential investment, totaled $6.5 billion in the first half of this year, putting it in position to surpass 2014’s total of $10.5 billion.

In a note to clients late Tuesday, economists at Goldman Sachs Group Inc. listed stability of the yuan and capital outflows as their biggest concerns and estimated the pace of money leaving China might have accelerated to “possibly between $150 billion and $200 billion” since the Aug. 11 yuan devaluation.

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Economist Zhu Haibin at J.P. Morgan Chase & Co. estimated outflows reached what he called a “remarkable” level of $340 billion from the third quarter of 2014 to the second quarter of this year. Economist Larry Hu at Macquarie Group Ltd. puts the figure at $264 billion over the same period.

Outflows could worsen in coming months should China’s currency weaken further or its economy show new signs of faltering. The dollar has risen 2.6% against the yuan this year. Recent disappointing economic data have called into question China’s ability to meet its 2015 annual growth target of about 7%.

“Capital outflows could get worse in the third quarter because of the deprecation expectations for renminbi,” said Zhang Ming, a senior economist at the Chinese Academy of Social Sciences, a government think tank, using an alternative name for the yuan.

Chinese companies also have become cautious about China’s growth prospects and expect the yuan to weaken with a “limited boost to business prospects,” according to a recent survey of Chinese companies by analysts at Standard Chartered PLC.

Officials at the People’s Bank of China have struck a more sanguine note. In recent days, they have echoed comments last month from top central-bank official Yi Gang, who said capital flows in and out of the country had remained normal, though he pledged to increase monitoring of cross-border money movements.

Outflows don’t appear to have reached alarming levels, and Beijing has plenty of firepower to curtail them. Its huge foreign-exchange reserves give it ample room to support the yuan’s value and make it attractive for investors.

Longer term, some investors are betting Beijing will continue to open its vast capital markets to the outside world, making its currency more attractive.

“It would be dangerous for investors to be shorting the yuan given the stated intention to open up the domestic capital markets over time,” said Andy Seaman, a portfolio manager at Stratton Street, a London-based investment firm. In a short bet, investors wager a currency or security will fall in value.

Still, recent moves to stem outflows show the balancing act Beijing is trying to strike between pursuing financial overhauls and keeping its economy stable as growth slows down.

Moves such as Tuesday’s effort to discourage betting against the yuan work against Beijing’s stated intention of gradually lifting capital controls. The latest action is a step back from market-oriented revision, said Zhong Zhengsheng, director of economic research at Hua Chuang Securities, a state-owned brokerage.

China largely restricts the ability of individuals and businesses to move money across its borders. A Chinese individual isn’t allowed to move more than $50,000 a year out of the country.

At Bank of China, foreign-exchange purchases greater than $1 million need to be reviewed by the bank’s headquarters in Beijing. Meanwhile, officials at China Citic Bank have been told by regulators to be more alert for people asking their friends and relatives to purchase and remit foreign currencies abroad, effectively skirting China’s capital controls.

China’s foreign-exchange regulator has circulated among banks a list of people with a record of such wrongdoing. “Banks [that] fail to spot those on the blacklist or turn a blind eye on it will be punished and fined by the regulator as well,” an official at Citic said.

A new central-bank rule, which starts Oct. 15, will require banks using a type of financial contract, known as currency forwards, to buy dollars while selling yuan to set aside reserves with the central bank. Under the new requirement, a bank that has sold a total of $100 of the currency forwards over the course of a month must deposit $20 at the central bank. The reserves will be held at zero interest for a year.

The reserve requirement is aimed at “fending off macro-financial risks,” a central-bank notice said.

Some investors said the move was a way to help the yuan. “The central bank wants to damp short-term speculation of renminbi selling,” said Tommy Ong, head of wealth-management solutions, treasury and markets for Greater China at DBS Bank in Hong Kong.

On Tuesday, the People’s Bank of China fixed the currency’s daily reference rate—around which it is allowed to trade in a limited way—at its strongest level against the U.S. dollar since Aug. 13.

Meanwhile, officials have intensified a crackdown on what are known in China as underground banks, which Chinese nationals often use to shift money in and out of the country. Meng Qingfeng, vice minister of public security, said late in August that those money-transfer agents remained rampant despite repeated enforcement efforts, according to the state-controlled Xinhua News Agency. Mr. Meng also urged police around the country to better coordinate with the central bank in the campaign, which will run through the end of November.

Beijing’s moves are casting chills over places such as the Chinese territory of Macau, the largest casino market in the world by revenue. Macau’s gambling revenue fell 36% from a year earlier to 18.62 billion patacas ($2.31 billion) in August, marking the 15th month in a row of declining gambling revenue, government data released Tuesday showed.

17B for little old NZ seems a large chunk of cash compared to FDI in other economies...

"Last year, Chinese companies plowed $12 billion into the U.S., up from zero in the early 2000s, making it the fastest growing source of foreign direct investment in the country. Chinese-affiliated companies now employ more than 80,000 Americans, according to New York-based Rhodium Group, which tracks cross-border investment."

http://www.bloomberg.com/news/articles/2015-08-30/chinese-build-u-s-fact...

There is no time frame on the $17 bn - could be spread over next 20 years

...there is also nothing to confirm it will ever be implemented. The article is meaningless hearsay.

What are the options for Chinese? Whole world took action to stop the 'madness' of them buying their countries. Canada is the latest example - so NZ is the easiest way to put the money in... it is bad -very bad for New Zealanders, our kids that we allow this to happen. It is so sad that house is not a family home anymore but business! It should not be like that !!!!!!!!!

100% agree and even Mr Lead from behind Key will have to sit up, take notice and do something eventually. He should have done something long ago but as he does not want to get offside with the constituency that he sees as his most supporting (property owning) he is too chicken to. If he doesn't he will go down in history as one of our worst