Chinese mainland a bright spot in global real estate
Print Edition
THE Chinese mainland was the second largest source of capital in the global real estate market last year, pouring US$10 billion into property assets abroad and trailing only Singapore in volume terms, according to a recent report from international real estate adviser Cushman & Wakefield. Meanwhile, the Chinese mainland was also the top target for Asian property investors last year, the adviser’s data show.
Globally, real estate investment dropped 6.3 percent year-on-year to US$1.21 trillion in 2014, marking the first such drop in five years, according to the report. The slump was pinned on a downturn in land transactions on the Chinese mainland.
Overall, researchers at Cushman & Wakefield saw mixed results in the Asia Pacific market last year. Despite sluggishness in the Chinese mainland’s land market, it was nevertheless the largest recipient of intra-regional investment as well as the second largest outbound investor within the region.
Looking ahead, the portfolios of mainland Chinese property investors will likely continue to expand and diversify thanks to a strengthening yuan, the country’s massive foreign currency reserves and a continued lack of domestic investment opportunities.
Elsewhere in Asia, Singapore and Malaysia witnessed slowdowns in foreign investment inflows; while Australia, New Zealand, South Korea and India saw strong increases.
“Investors have generally shown a propensity to hold and are moving into assets that have the ability to generate a stable source of income or returns,” wrote Sigrid Zialcita, head of Asia Pacific Research at Cushman & Wakefield. “This is largely due to the evolving investor base, as more sovereign wealth funds, pension funds and private equity have increased allocation to the region’s real estate.”
Outside of Asia, the Americas and Europe saw foreign investment inflows increase by 11.4 percent and 11.8 percent respectively last year, according to Cushman & Wakefield. Indeed, results in Europe might have been even more impressive had it not been for a significant strengthening of the US dollar late in 2014.
“Property cooling measures in China’s mainland, Singapore and Hong Kong have had a huge impact on investment activity in the region last year, diverting capital towards Tokyo, where policies were more conducive, as well as to Seoul and Sydney, where fundamentals in occupier markets were showing signs of improvement, in addition to their higher yields,” Zialcita added. “Inter-regional outflows also picked up pace as Asian investors increased their asset holdings in London and New York.”
Worldwide, Singapore and China’s mainland were the third- and fourth-largest sources of cross-border capital respectively. Chinese outbound investment rose thanks to supportive policy measures and the rolling back of earlier capital control policies. For instance, policy makers recently gave Chinese insurers permission to put more of their money into overseas real estate assets while also allowing more overseas transactions to be completed without administrative approval.
Globally, Asia Pacific was the second-largest source of cross-border capital, where inter-regional investment accounted for over half of the total amount received, the report said.
Meanwhile, the US moved back to the top of the global investment list for the first time since 2009, receiving US$390.6 billion in 2014, up 16.2 percent from the prior year.
Together, the Chinese mainland and the US dominated the global market, together grabbing 60 percent of last year’s total investment.
Cushman & Wakefield’s report foresees global investment volumes rising 11 percent in 2015 to US$1.34 trillion, led by strong spending growth in Europe and the US.
“The 2014 pick-up was better than many earlier predictions but the 2015 outlook is stronger still, with the brakes now coming off the market,” according to David Hutchings, head of EMEA investment strategy at Cushman & Wakefield.
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