SOURCE: Colliers International

Colliers International

September 09, 2015 02:44 ET

The Medium to Long Term Impacts of the Rapid Devaluation of the Yuan on the Real Estate Market

HONG KONG, CHINA--(Marketwired - September 09, 2015) - The unexpected devaluation of the Chinese Yuan has sent shock waves through asset markets around the world not only because of the significant and rapid degree of downward adjustment, losing 4.6% within a period of just three days, from August 11 to 13, but also because of the underlying implications for ongoing economic reform in China. The market suggests the recent Yuan devaluation is a clear sign of a policy shift away from stimulating internal consumption back to pushing export growth as a means to prevent the economy from any further significant slowdown.

In the paper "The Chinese currency shock", Colliers highlighted some of the region-wide factors that are worth considering when assessing the potential impact of the depreciation of the RMB on China outbound real estate flows, and the future impact on the real-estate market for occupiers.

The following highlights the report's findings:

  • The market is indicating that there will be no sharp plunge in the RMB over the near term but that there will be further downward adjustments
  • Rather than the expectation of a rate hike in the coming months of 2015, the more likely scenario right now is a deferral of the upcoming cycle of rising interest rates into 2016
  • The pace of outbound real-estate flows will gather further momentum in the next few quarters and buying interest will remain strong from high-net-worth individuals
  • The outlook is not so positive for real-estate market for occupiers in China because the Yuan devaluation reflects the economic outlook stemming from weakening external demand

"The challenge in the occupier market in China is that there is a divergence between the upward cycle in commercial rents and the consolidation in aggregate demand," Simon Lo, Executive Director of Asia Research & Advisory explained, "as such, most prudent real-estate occupiers should remain cautious in committing to real-estate expansion plans, at least over the next six to twelve months."

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