APAC economies to benefit as China reopens to the world

China’s reopening is expected to be positive for APAC economies and real estate markets

It has been about a month since China announced that it would once again issue visas to foreign tourists after a pandemic-induced three-year visa-issuing freeze. As China reopens to the world, neighbouring economies are expected to reap the benefits.

Beijing’s departure from a highly regulated zero-Covid approach that was straining the economy comes after it declared triumph over the virus.

PGIM Real Estate Head of APAC Investment Research Cuong Nguyen says real estate markets will benefit. “China’s reopening is expected to be positive for APAC economies and real estate markets, with those having higher exposure to the Chinese demand potentially seeing the most favourable upsides,” he says.

For Australia, China’s open borders will mean an influx of international students bringing a boost to the economy. Before the pandemic in 2019, Chinese students accounted for the largest proportion of Australia’s international students. “Australia’s purpose-built student accommodation (PBSA) and the residential market will be among the top beneficiaries of returning Chinese students,” Dr Nguyen says.

Australia is expecting the arrival of nearly 50,000 students from China in the next few months.

This is a double-edged sword with international students both boosting the economy and placing pressure on an already tight rental market. “The Property Council of Australia estimates that PBSA facilities in major cities are at near-full capacity, with almost no vacancy expected throughout 2023,” Dr Nguyen says.

Students will look for alternative accommodation in traditional rental dwellings. “As such, the return of Chinese students will add a further boost for rents to grow.”

China’s residential sector stabilising

“The market expecting the most fundamental shifts in investor sentiment and expectation is China itself,” Dr Nguyen says. After a challenging time over the past two years, Dr Nguyen says China’s residential sector shows signs of stabilizing.

He says efforts to bolster the residential market, including initiatives such as improved mortgage terms for first-time buyers, decreased interest rates, and relaxed lending criteria for developers, are beginning to yield positive results.

While the housing market is recovering Dr Nguyen expects the pace of recovery to remain unbalanced across cities.