Chinese Investors Set To Ramp Up Investment in Latin America Real Estate Market

15 Jun 2014

One interesting component of Chinese overseas investment has been a growing focus on the real estate sector.   It might be expected that Chinese overseas real estate sector investment would be an insignificant fraction of investment in sectors that are strategically more important for China’s growth, such as metals, but according to the China Global Investment Tracker created by the American Enterprise Institute and the Heritage Foundation, as of 2013 investments in the metals segment amounted to US $114 billion compared to US $74 billion for real estate.

Chinese overseas investment in the real estate sector has accelerated this year.  According to an article by Xinhua, Chinese institutional investment in the first quarter grew 25% to US $2.1 billion.  Investment in the overseas residential sector in the quarter reached US $1.1 billion, nearly double the amount one year earlier.

There are a number of factors driving Chinese investment in the real estate sector abroad, including high amounts of Chinese emigration, growing Chinese business presence outside of China and Chinese interest in locating real estate markets that offer attractive returns or balance against downside risk inherent in China’s volatile property markets.    Approximately 150,000 Chinese emigrate annually.

While to date key target markets for investment have been Britain, Australia and the United States, it is only a matter of time before Chinese real estate investment numbers in Latin America become significant.   To take one example, there over a million persons of Chinese ancestry in Peru, and the combination of this shared cultural base with the fact that Peru has many sectors which are of strategic importance for China means that it is a natural target for expanded real estate investment.   The Wong supermarket empire was built by Erasmus Wong, a Chinese Peruvian.

Outside of Peru, there are many likely targets for increased Chinese real estate investment, particularly in places that offer opportunity for significant growth or that provide opportunities to diversify global real estate portfolios.  Further the combination of a need in Latin America for real estate investment and large amounts of Chinese capital available for investment creates natural synergies which have the potential to significantly positively impact Latin America’s economic growth.