Action needed as Chinese buyers drive up housing prices in Southeast Asian countries
Property investors from the Chinese mainland are shifting their sights to Southeast Asia, a development that may have negative implications for the economies in that region, so tougher regulations are necessary.
Statistics from Shanghaibased overseas housing market data platform juwai.com show that during the second quarter of this year, Thailand rose from the sixth to the third most popular investment destination for Chinese homebuyers after the US and Australia.
Inquiries about Thai properties on juwai.com surged 147 percent year-on-year, with inquiries about Malaysia up 95 percent.
Other Southeast Asian countries like Cambodia, Vietnam and Myanmar are also becoming more popular with mainland buyers, a development that some media reports attributed to investor confidence in the growth potential of countries along the route of the Belt and Road initiative.
Nevertheless, experience shows that overseas propertybuying sprees by Chinese investors can have huge consequences for the target economies. Foreign capital inflows usually drive up local property prices beyond their intrinsic value and housing becomes unaffordable to local people, contributing to social instability.
Moreover, the excessive development of the housing sector can distort local economic structures and pricing systems, as strong demand for steel, cement and other construction materials may push up prices, increasing cost pressures on manufacturers and other real economy sectors.
Joint efforts are needed to beef up regulations and curb such investment. Chinese regulators must enhance supervision over the use of outbound funds and restrict outflows for property investment. On the individual level, investor education must be strengthened since many people have scant knowledge of the risks of investing in an unfamiliar country.
Southeast Asian countries, for their part, must develop and implement policies that will avoid the negative impact that Chinese homebuyers may have on their local markets and societies.
Australia and Canada, two popular destinations for Chinese investors, have already imposed taxes on foreign nationals buying properties in their countries. Germany and other countries have strong reputations for maintaining longterm stability in their housing markets and cracking down on speculation.
With Southeast Asia gaining increasing attention from Chinese capital, it is essential for regional countries to learn from the experience of these advanced economies.