Institutional investors and developers based in Mainland China are expected to not only slow down their outbound investment into overseas real estate markets, but increase their dispositions, especially with the economic uncertainty arising from COVID-19.
A new survey by Cushman & Wakefield found that 48% of these investors are planning to reduce their investment in international markets in 2020. The Canadian market is no exception, which was already experiencing a slowdown in investment originating from Mainland China prior to the pandemic.
“[The activities] by Mainland China investors were mainly due to central government policy guidance and tightened lending to real estate developers and operators, and we anticipate this trend of decreasing investments and increasing dispositions to continue in 2020 by Mainland China investors globally,” Jason Zhang, the head of China outbound investment capital markets at Cushman & Wakefield, told Daily Hive.
This is the third consecutive year the number of investors that were increasing their overseas investment dropped, now down to just 13% of respondents. As well, 2019 marked the first year dispositions by Mainland China and Hong Kong investors outweighed acquisitions.
This comes as China just reported its first GDP contraction since at least 1992, with the first quarter of 2020 seeing the economy shrink by 6.8%.
“The COVID-19 pandemic also has undoubtedly added more obstacles to investing overseas in general for Chinese investors,” he added.
That said, while there will be a significant impact on deal volume in 2020, his firm believes some international markets could recover and become accessible more quickly than others. Certain sectors of the real estate market, such as retail, hotels, and senior care facilities, may also see sector-specific distress.
Attention recently turned to investing in the United Kingdom, with the uncertainty over Brexit representing an opportunity to invest.
Based on their findings, the trade war is not as significant a barrier as may have been reported for Mainland Chinese investment in the United States. Just 35% of investors said trade tensions were prohibitive to ongoing investment, and only 16% plan to reduce their exposure to the American market.
Despite the challenges, Edmonton area real estate values 'have held up extraordinarily well' – Edmonton Journal
I have to say the Edmonton area real estate market has surprised me.
When you consider the onslaught we have had in the past five years — oil price crash, more than 100,000 job losses, fires, floods, domestic and international trade disputes and then COVID-19, I would say the Edmonton and area real estate values have held up extraordinarily well.
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Since 2014, we’ve only seen modest declines in prices, with single family homes declining the least. Edmonton remains Canada’s most affordable major city with one of the highest average incomes.
Other Canadian cities have seen significant price gains in the same time period creating a bigger difference in real estate values between regions. We have had clients who can work anywhere and chose Edmonton as they can afford much nicer living quarters here for the same money.
Given the lower prices and interest rates combined with rising rental demand, it is easier for investors to get positive cash flows. We are seeing investors looking at condos for their positive cash flow. This fact will help to support our real estate values.
Toronto and Vancouver Real Estate Inventory May Get A Boost From AirBNB Slowdown – Better Dwelling
Canadian real estate markets may be getting another inventory headwind soon. National Bank of Canada (NBC) research estimates AirBNB hosts may contribute to oversupply later this year. As the slowdown impacts hosts, many may be incentivized to sell. By their estimates, just a quarter of hosts selling would cause inventory in cities like Toronto and Vancouver to swell.
AirBNB and Housing Inventory
AirBNB helps homeowners take existing housing stock and convert it to short-term rentals. Rather than staying in hotels, travelers can now stay in existing non-hotel stock. At first, it wasn’t a big issue when just a few people were doing it. As the platform expanded, people began buying additional housing just to operate short-term rentals. By repurposing housing that would otherwise be long-term units, cities now need additional housing. Basically, short-term rentals lead to an inventory squeeze, pushing rents and prices higher. Temporarily at least, for as long as the squeeze persists. That squeeze could end as quickly as travel did.
The Travel Industry Expects A Big Slowdown
The travel industry doesn’t expect travel to recover quickly from the pandemic. The US has approved some routes cutting plane traffic up to 90% until September. The IATA, the trade association for international airlines, also doesn’t see traffic returning to 2019 levels until at least 2023 – at the earliest. What does this mean? Fewer users of short-term rentals, and more competition from hotels for those travelers. All of this can have a big impact on real estate inventory, according to NBC numbers.
Canada’s Biggest Real Estate Markets May See Inventory Spike
If just a quarter of AirBNB inventory is sold off, NBC sees a lot more real estate listings on the market. In Vancouver, the bank estimates real estate listings would rise 12%. Montreal would see an increase of 27% in resale listings. Toronto is another story though, with inventory forecasted to rise a whopping 34%. That’s with just 25% of AirBNB exiting as hosts.
AirBNB Boost To Canadian Real Estate Inventory
The potential increase in real estate listings if 25% of AirBNB properties were listed for sale.
Source: National Bank of Canada, Better Dwelling.
The boost is another headwind for inventory rising later in the year. Inventory was already expected to rise in the coming few months. NBC economists believe this would be “exacerbating oversupply in the coming months.”
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How Is The Real Estate Market In Muskoka Post COVID19 – Hunters Bay Radio
In a brand new video podcast series, Gerry Lantaigne with Sutton Group – Muskoka Realty discuses the world of real estate in Muskoka during the Coronavirus pandemic.
Join Gerry every month as he updates you on The State of Real Estate
Watch the inaugural episode here:
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