Big jump in real estate investments from China into foreign markets in 2016

A view of old houses surrounded by new apartment buildings in Guangfuli neighbourhood in Shanghai, China.
A view of old houses surrounded by new apartment buildings in Guangfuli neighbourhood in Shanghai, China.PHOTO: REUTERS

SINGAPORE - Investors in China still have a healthy appetite for global real estate assets despite reports of mainland capital controls and slowing economic growth.

Last year, China capital cross-border real estate transactions hit US$26.6 billion (S$36.4 billion), up nearly 38 per cent from US$19.3 billion in 2015.

China investments made up nearly 40 per cent of all Asian cross-border capital invested.

Significantly, it was also more than the US$22.2 billion invested domestically in China, according to data from Real Capital Analytics.

According to Knight Frank's Active Capital Global Report released on Wednesday (July 19), Chinese cross-border investment may still rank second to the United States, but it is increasingly becoming the key driving force behind global real estate transaction volumes.

Some of the headline-grabbing deals involving Chinese capital include HNA Group's purchase of the iconic 245 Park Avenue in New York for US$2.21 billion and China Investment Corporate's purchase of logistics business Logicor from Blackstone for 12.25 billion euros.

Mr David Ji, head of Knight Frank research for Greater China, noted that the Chinese investors were previously large Chinese insurance firms, large developers and state-owned enterprises (SOE).

"Since 2015, we have seen more determined advances, even dominance in some markets by private conglomerates or developers, including HNA Group, Fosun and R&F. Compared to their SOE counterparts, this group of investors and developers are far more nimble and are able to make decisions more quickly," he said.

"We expect to begin to see less of a rush for trophy assets and more methodical behaviours that are commonly observed from mature players."

He added that he expected transaction volumes from China to reduce in the short term because firms would consider risks such as currency fluctuations, asset price inflations and Chinese capital outflow controls.

"This reduction may well prove to be temporary as we expect that the capital controls will be loosened as the yuan exchange rate improved and GDP growth continues on a steadier path," he said.

Knight Frank said that the key markets which China investors are focusing on are gateway cities such as London and New York and other cities on the "Belt and Road" route, such as Singapore and other South-east Asian hubs.