Residential property investment in China is dominated by Chinese nationals and has been extremely active, because real estate has always been viewed as a reliable store of wealth. Savings rates in China are exceptionally high by global standards. Gross savings as a percentage of GDP stand at 51%, according to World Bank Data (the figure is 17% in US and 13% in UK).
This, and the rapid growth of Chinese wealth, fuelled a massive wave of investment into residential real estate over the last two decades. Between 2003 and 2010 the Chinese economy enjoyed close to double digit annual growth, and the average price per square metre of new dwellings in China more than doubled.
In efforts to curb this rapid growth and keep affordability levels in check, the government introduced a series of policies to curb investment purchases. First tier cities, such as Shanghai, have seen high levels of both local and inward investment from other regions. The city has attracted some of the strictest of the new controls, which include higher deposit requirements and limitations on second property purchases.
Recent slowing economic growth meant price growth fell to very low rates by Chinese standards across the country, just 1.4% in 2014. However, consecutive interest rate reductions and a pick up in sentiment have stoked transactional activity in leading cities and resulted in strong price growth.
27 out of 70 cities tracked by the National Bureau of Statistics recorded a month-on-month increase in new build residential prices in June 2015 (compared to only one city Shenzhen seeing price growth at the beginning of 2015). The outlook remains positive as the pick up in sales volumes and a stabilisation of pricing are expected to lower the inventory level. This should result in a healthier market in the mid to long run.