Spending on realty abroad sees growth

Chinese outbound real estate investment continued to grow last year with the support of policies like the Belt and Road Initiative, reaching nearly $30 billion, double that of 2014, a report by global property consultancy Knight Frank says.

Most of the investments were in gateway cities such as New York, London and Sydney, and regional hubs like Chicago and Seattle.

A Knight Frank analyst forecast further growth in outbound real estate investments this year despite the Chinese economic slowdown.

"As Chinese capital outflow increases with policy support such as the Belt and Road Initiative, the Asian Infrastructure Investment Bank and China's trade and financial initiatives, capital outflow will become increasingly sustainable," says David Ji, director and head of research and consultancy at Knight Frank China.

"This means ample opportunities for gateway markets and key regional hubs."

Ji says China's institutional investors as well as banks and insurers are focused on commercial properties with stable returns, which show their preference for deals with lower risks.

In the future, developers may also look into opportunities in the emerging markets of Southeast Asia and South Asia. Residential properties will be their preference in cities, with demand supported by demographic and commercial conditions.

Last year the top 10 overseas deals completed by Chinese mainland insurers, institutions and developers focused on commercial properties, particularly office real estate, according to Real Capital Analytics, a research and information services provider.

For example, Ping An Insurance (Group) Co purchased Tower Place in London for $506 million in January 2015, and Anbang Insurance Group Co purchased the Merrill Lynch Financial Center in New York for $414 million.

Insurance giants in particular continue to splash out on trophy properties. There has been significantly increased investment in commercial real estate in the United States, making it the fastest-growing mature market. Strong growth in Australia continues unabated, while investment in the United Kingdom is on par with that of 2014.

Knight Frank's report says a mixed group of investors consisting of lesser-known small-to-mid-cap companies and developers, private equity funds and individuals is increasingly active and investments in mature markets also are forecast to grow.

As for individual outbound real estate investors in China, more are expected to choose to allocate their assets in residential properties. Their investment decisions are more closely linked to their children's education and their own needs for care in the years after retiring. Destinations with good educational resources and ample land will be priorities, the report says.

wuyiyao@chinadaily.com.cn

(China Daily Africa Weekly 05/06/2016 page29)