Now that our property markets seem to be balancing and the days of double-digit appreciation have subsided, I’ve had many conversations with investors over what the medium-term outlook for the Bay Area could be.
The obvious factors are all in play; interest rates, demographics, supply increases and rising incomes. One of the hardest to pin down is the inflow of buyers from overseas, which has been increasing mightily over the last two years.
This recent WSJ article does a good job of laying out both the attractions for migration and the scale of the potential; it quotes a recent study finding that 64% of wealthy Chinese had plans to leave and points out why:
To be sure, the departure of China’s brightest and best for study and work isn’t a fresh phenomenon. China’s communist revolution was led, after all, by intellectuals schooled in Europe. What’s new is that they are planning to leave the country in its ascendancy. More and more talented Chinese are looking at the upward trajectory of this emerging superpower and deciding, nevertheless, that they’re better off elsewhere.
The decision to go is often a mix of push and pull. The elite are discovering that they can buy a comfortable lifestyle at surprisingly affordable prices in places such as California and the Australian Gold Coast, while no amount of money can purchase an escape in China from the immense problems afflicting its urban society: pollution, food safety, a broken education system. The new political era of President Xi Jinping, meanwhile, has created as much anxiety as hope.
That said, one ex-pat I’d been discussing this with reminded me that all of the rules regarding capital controls are still on the books in China. What remains to be seen is how quickly the PRC could begin to enforce them should they want to stem the tide.