Real Estate Investor Magazine South Africa September 2015 | Page 58

COMMERCIAL

Connecting The Dots With

Chinese Investors
Investments into local real estate
BY RICHARD WADE

D

irect foreign investment in real estate in South
Africa amounts to little more than 6% of the
total market. So do exchange rates matter
when we consider investing in real estate locally?
Three recent, and at first sight, not necessarily interconnected developments indicate they might.
Interest Rates
We have no idea how markets are going to react when
the US Federal Reserve ends the era of near-zero
interest rates with the recent signalling that September
will see the first rise in interest rates since the recession
of 2009.
The Yuan
China devalued its currency, which is supposedly
pegged to the US dollar, twice in two days in August,
despite the World Bank urging China to let its

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SEPTEMBER 2015 SA Real Estate Investor

currency rise to contain inflation and stop the economy
overheating. The Bank of China announced that it
was moving to a more “market-based” onshore foreign
exchange regime, which is either a milestone for
market reform or a rescue for a spluttering economy.
China’s central bank has done its best to support the
first interpretation, as with R47tn in foreign exchange
reserves, China’s “ability to stabilise the exchange rate
in the short and medium term far, far exceeds that of
most emerging market economies”.
Trade with China
China is now the number one trading partner for most
African countries, including South Africa. In an effort
to make the buying and selling of goods much easier,
some states introduced the yuan into their foreign
exchange system e.g. Nigeria. African commodities,
such as gold and platinum, priced in dollars, could take
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