Foreign capital gives mainland China’s commercial property a miss as global uncertainties and slowing domestic economy take a toll on sentiment
- Foreign institutional investors have been deterred by the prospect of lower asset values and the further decline of the yuan, says Li Yandong, partner at Gopher Asset’s real estate fund investment unit
- Since the fourth quarter of last year, the foreign funds’ proportion of total investment in the sector has dropped from 50 per cent to 10 per cent, according to data from Cushman & Wakefield
Foreign investors’ purchases of mainland Chinese commercial real estate have fallen dramatically over the last year as global economic headwinds and slowing domestic growth have taken a toll on the market.
But as overseas funds have withdrawn, domestic buyers have been returning to the sector, according to property experts.
In the fourth quarter of last year, foreign investment was strong, making up about half of all money going into the sector. That level has now fallen to less than a tenth.
“Foreign institutional funds had been relatively active in China’s commercial assets late last year as yuan-denominated buyers became more inactive amid credit tightening,” said Li Yandong, partner at Gopher Asset’s real estate fund investment unit.
“The trend was different from what happened in 2017 when mainland funds faced excessive liquidity in the market.”
Gopher is the asset management arm of New York-listed Noah Holdings, which is the largest independent wealth manager in China. As of the first quarter of this year, its real estate funds’ assets under management surpassed 17.5 billion yuan.
The buying by foreign funds has slowed down as global economic uncertainties and the prospect of lower asset values dampened appetite, Li said in an interview with the South China Morning Post in Shanghai.