Trading Places: Chinese Flee Stocks for Offshore Property [Chart]
Canadian and Australian housing sales set new monthly records in June
The Chart of the Week is a weekly feature in Visual Capitalist on Fridays.
Every transitioning economy has its growing pains.
This turns out to be especially true when that economy is an unusual Jekyll-Hyde type of hybrid: it’s run by a communist government that favours control, but at the same time wants to harness the growth of free market dynamics.
Over the last two years, the Chinese government has worked to relax margin restrictions. By changing these rules, it would allow more regular folks to borrow on margin to buy into and fuel the stock market. The only problem was that most of the public had never invested before, and intense speculative buying replaced any disciplined search for value or growth.
The market soared to new heights. New investors saw the gains and just kept piling in. Between June 2014 and May 2015, more than 40 million new trading accounts were opened, and many of these new equity investors had less than a high school education.
The Shanghai Composite Index, which tracks shares traded on Shanghai’s stock exchange, climbed over 150% since late 2014.
Then, the party abruptly came to an end. Over the last month, the market crashed and lost about 30% of its value, worth about $3 trillion. The government had taken unprecedented steps to slow down the crash, including halting IPOs, cutting interest rates, and other “stability measures”. Top brokerages even pledged to collectively buy 120 billion yuan ($24 billion) of shares to steady the market. Finally, the China Securities Regulatory Commission banned sales of shares for major investors for six months, and suspended trading in over 1,000 stocks.
The once frothy market has had mixed reactions over the last few days, but remains near its three month low.
The Pacific Connection
While surely some people have lost faith in Chinese stocks as of late, that doesn’t mean money wasn’t made. The market is still up 80% from a year ago and many that were in early made a killing.
What are some of these people doing with their newfound capital? Many are buying real estate in China to store their wealth.
In a survey carried out by the Southwestern University of Finance and Economics in Chengdu, 28,140 respondents were polled between June 15 and July 2. They found that more people were taking money from the stock market and buying property. In Q2, 3.7% of stock investors bought housing compared to 2.3% in the first quarter. Of those that bought property, 70% of households have made money in the stock market.
People from China have also looked abroad to store their wealth in housing. It’s no secret that Canada, Australia, and the United States have all felt the effects of foreign buying in their property markets over the years.
Cities such as Vancouver and Toronto have had an influx of new buyers fueling the boom, and this is part of the reason why Canada is now considered to have the most overvalued housing market in the world.
Sydney and Melbourne have seen similar effects, and Australia was recently ranked by the Economist as the second most overvalued housing market relative to income.
In the United States, the Bay Area continues to also have a bull market in property. Technology plays a big role in this, but foreign buyers have also been helping drive prices there as well. California is a popular destination for Chinese buyers, as 30% of all Asian-Americans reside in the Golden State.
In the month of June, housing prices and the number of sales have reached record levels in some of these markets.
The two hottest Canadian markets remained on fire, despite the country edging into a technical recession. In Vancouver, housing sales were 29.1% higher than the 10-year average for the month of June. This brought the benchmark housing price to C$1.1 million for a detached home. June was the fourth straight month with over 4,000 sales, a new record for the city. Luxury sales rose 48% in the period between January and June compared to last year.
Toronto’s luxury market is even hotter, with sales increasing 56% over the first half of the year. The benchmark housing price in the city for a detached home is now C$1.05 million, a 14.2% increase over the last year.
Two of the more prominent markets in Australia also kept their momentum. In Sydney, prices have soared 22.0% over the last 12 months for homes, to a median price of A$900,000. Melbourne, which started to cool off in the beginning of 2015, found resurgence in June that brought it back to strong double-digit annual growth.
Melbourne, which typically has less expensive homes than Sydney, Vancouver, and Toronto, is starting to join the million dollar club as well. Recently, there are 17 new postal codes that now have homes with A$1 million median prices.
From the Front Lines
The million dollar question is: to what extent do exits from the Chinese stock market and capital flight influence the markets in the above cities. Everyone can agree there is some influence, but narrowing down the specifics is much more difficult.
This is because there are not many official records on the specifics of foreign ownership, and much of the time transactions are done indirectly through family and friends.
Aside from the correlation with the numbers above, there is mainly anecdotal evidence from people on the ground.
In Vancouver, for instance, a Reuters survey found that of 50 land titles for detached Vancouver Westside homes worth over C$2 million, that nearly half of purchasers had surnames typical of mainland China. Five real estate agents primarily focused on sales on Vancouver’s more luxurious west side estimated that between 50% and 80% of their clients had ties to mainland China.
Michael Pallier, the Principal at Sydney Sothebys International Realty, said recently that volatility in the Chinese market was prompting more interest in local properties in the luxury market.
“Last month in our office we sold 20 properties for $115 million turnover in June, of which 25 per cent were sold to Chinese buyers, so we do have a lot of experience dealing with Chinese markets,” said Mr. Pallier, “They’d rather put the money into a property than put it into cash or into shares.”
David Fung, the vice-chair of the Canada China Business council, said that the stock market crash and volatility drives more investments into Canada, including British Columbia’s hot property market.
“They’re not looking necessarily for a very high return because it is for their own insurance,” said Fung.
Ranked: The Richest Countries in the World
These countries hold 74% of the world’s $204 trillion in private wealth. See the 10 richest countries, and how their totals have changed over time.
Ranked: The Richest Countries in the World
Since the 2008 financial crisis, global private wealth has been steadily growing.
In fact, overall private wealth worldwide reached $204 trillion in 2018, which is a 26% increase over the past decade.
This week’s chart, which uses numbers from the Global Wealth Migration Review 2019, examines the top 10 richest countries and the growth of private wealth from 2008 to 2018.
|Rank||Country||Private Wealth in $USD (2018)||10-yr change (%)|
|#1||🇺🇸 United States||$60.7 trillion||27%|
|#2||🇨🇳 China||$23.6 trillion||130%|
|#3||🇯🇵 Japan||$19.1 trillion||18%|
|#4||🇬🇧 United Kingdom||$9.1 trillion||4%|
|#5||🇩🇪 Germany||$8.8 trillion||7%|
|#6||🇮🇳 India||$8.1 trillion||96%|
|#7||🇦🇺 Australia||$6.0 trillion||48%|
|#8||🇨🇦 Canada||$6.0 trillion||23%|
|#9||🇫🇷 France||$5.9 trillion||-7%|
|#10||🇮🇹 Italy||$3.8 trillion||-14%|
Combined, the 10 countries above represent 74% of total private wealth worldwide.
These trends are staying consistent with the numbers seen in 2017. Asian countries such as China and India showed the highest uptick in wealth gains, holding their #2 and #3 spots on the list, while European countries such as France and Italy actually saw a decrease.
Trends in the Wealth Landscape
Over the last 10 years, China has experienced the largest increase in wealth at 130%. This growth also means that China now boasts more high-net-worth individuals (HNWIs) than any other country except the United States.
While India doubled its total private wealth over the 10-year period, wealth per adult remains at just 22% of the global average.
The U.S. continues to lead in wealth numbers, holding 30% ($60.7 trillion) of the world’s total private wealth. Unsurprisingly, the U.S. remains home to the most millionaires in the world.
The World’s Millionaires: Top 3 Countries
- United States: 17,350,000
- China: 3,480,000
- Japan: 2,809,000
- World total: 42,155,000
Source: Credit Suisse
Australia now tops the above list in terms of highest wealth per adult, and it is second in the world only to Switzerland in the context of major nations.
Despite the recent turmoil and uncertainty stemming from Brexit, the United Kingdom still saw overall growth in the past decade, moving from #5 to #4 rank on the list of countries with the highest private wealth.
Projections from New World Wealth estimate that total global wealth will reach $291 trillion by 2028, driven by strong growth in Asia.
Rising Wealth Inequality
Unfortunately, this growth is also linked to the growing problem of wealth inequality gap across the globe, and the gap seems to get bigger every year.
The average global wealth per adult is approximately $27,000 – but of the total adult population, 64% have a net worth of less than $10,000. The bottom half of adults in the world now own less than 1% of all household wealth.
By contrast, 85% of all household wealth is owned by the richest 10%, and the top 1% own almost half (47%) of the world’s household wealth.
The eSports Boom, and the Numbers Behind the Sector’s Explosive Growth
Everything you need to know about the eSports Boom, including the sector’s rapid growth, massive prize pools, and the most valuable eSports companies today.
The oldest professional sport teams can trace their start back to the mid-19th century, a period when casual past times such as baseball or football transitioned into more organized leagues.
Since this tipping point, pro sports has thrived around the world, and the business of sports has evolved into a multi-billion dollar ecosystem for teams, leagues, players, merchandisers, sponsors, broadcasters, and event spaces.
Today, this evolution still continues – and it is being driven by the emergence of eSports (electronic sports), an exciting frontier for fans and business alike.
Today’s chart breaks down the eSports boom, including data on the sector’s rapid growth, prize pools, and the most valuable eSports companies today.
Despite having a reputation in the media and in popular culture as being on the fringes, it is clear that gaming is now a truly mainstream phenomenon.
In fact, the global gaming industry has now eclipsed $135 billion in revenue worldwide – a figure that is twice as much as the film and music industries combined.
With hundreds of millions of avid fans around the world, demand to watch the most elite gamers has reached a fever pitch – and now, it’s not uncommon to see sold-out arenas, big name sponsorship deals, and massive prize pools in the name of eSports.
Defining the eSports Ecosystem
Like any professional league, eSports creates the foundation for an entire ecosystem of opportunities.
Players are central to the ecosystem, since they are the stars and they have their own personalities. One famous star is Kuro Takhasomi (KuroKy), who has brought in a whopping $4.2 million in prize money from Dota 2 tournaments so far. He has earned more than any other player in eSports.
Because the games played are mostly team-based, there is a crucial element of teamwork involved. eSports franchises are currently selling for millions of dollars. It’s worth noting that these franchises don’t just employ players – they also hire staff that can better ensure the success of players, such as coaches, trainers, and personal chefs.
Games and Developers
Some of the most important games in the eSports world right now include: Dota 2, Counter-Strike, League of Legends, Overwatch, Fortnite, and Call of Duty.
Leagues and tournaments can offer massive prize pools for players. The biggest single pool so far was $25.5 million, offered for a Dota 2 tournament in 2017 (“The International”). It’s the second-largest prize pool offered in any kind of sport, behind the U.S. Open (tennis).
Running eSports events is big money, and organizers of events can tap into sponsorship and fan revenue. Sometimes game publishers will organize the events, but third-party ones also exist in the ecosystem.
Sponsors like Coca-Cola, Intel, and Mercedes-Benz have shelled out millions of dollars to sponsor events and reach the massive audiences associated with eSports. In more recent news, SAP signed a deal to sponsor one of the biggest names, Team Liquid.
Broadcasters, both traditional and online (YouTube, Facebook Live, Twitch, etc.), are also in to get a part of the action. Recently, game developer Blizzard signed a broadcasting deal with Disney to broadcast Overwatch League playoffs on ESPN, ABC, and Disney XD.
What do you think is the most exciting part of the eSports boom, and why?
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