Chinese Investors are Flocking to Southeast Asia to Buy Commercial Real Estate

Chinese investors are flocking to Southeast Asia to buy commercial real estate due to political tensions and higher interest rates in the US and Australia.

Chinese investors are flocking to Southeast Asia to buy commercial real estate due to political tensions and higher interest rates in the US and Australia. According to the ranking of real estate technology company Juwai IQI, Southeast Asia's commercial real estate market has become increasingly attractive to Chinese investors. Indonesia is currently the top destination for Chinese investment in the sector, with Malaysia in third place and Thailand in fifth place, according to the company.

Investors perceive Southeast Asia as an attractive destination due to trade relations. The International Monetary Fund (IMF) projects Southeast Asia's economy to grow this year by 3.4-5%, whereas interest rates in the US and Australia currently range from 4.10% to 5.25%, respectively. Meanwhile, interest rates in Indonesia, Malaysia, and Thailand range from 2 to 5.75%. Kashif Ansari, CEO of Juwai IQI, stated that Chinese investors are avoiding markets where future political tension may arise, making buying and selling more challenging. In contrast, Southeast Asia benefits from trade relations with China and is therefore an attractive investment destination.

Chinese Investors are Flocking to Southeast Asia to Buy Commercial Real Estate

Beijing enforces strict capital controls, providing "further advantages to Southeast Asian countries because investors find it easier to obtain government permission to carry out projects in this area," noted Kashif Ansari. Despite the US and Australia withdrawing from their monetary tightening policies, Southeast Asia's shifting preference for commercial real estate is expected to continue due to the momentum it has gained.

In addition to Southeast Asia's attractiveness in the market, data from real estate services company JLL Capital Markets showed that Chinese investors also purchased $4 billion in domestic assets in the first three months of 2023, far outweighing the $500 million invested outside of their borders. Ada Choi, head of Asia-Pacific tenant research at real estate services firm CBRE, commented, "Chinese investors also tend to be more inward."

Southeast Asia is proving increasingly alluring to Chinese investors searching for real estate opportunities abroad. Rapid economic growth, less political strain, and a favorable business climate underpin this trend. Moreover, foreign investors wanting to establish better business ties with China typically choose to invest in Southeast Asia, as it provides a convenient way to tap into the massive Chinese market.

Indonesia, Malaysia, and Thailand rank among the top five destinations in Southeast Asia for Chinese investors. Indonesia and Malaysia were in fourth and fifth place, respectively, in 2022, with Thailand not even making it into the top five. On the other hand, in 2022, the US was the preferred investment destination but did not make it into the top five.

Southeast Asia's commercial real estate sector is increasingly attractive to Chinese investors due to the region's growing economy, favorable business climate, and trade relations with China. As a result, Chinese investors are seeking to purchase commercial real estate properties in Southeast Asia instead of the US and Australia, which have higher interest rates and political tensions. In the coming years, this trend is expected to continue as China's economy continues to grow, and Southeast Asia continues to benefit from its proximity and trade relations with China.