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China Conference

China's insurers could pump US$240 billion into global real estate

Loosened regulations for insurance companies could see them on buying spree in years ahead

PUBLISHED : Tuesday, 27 October, 2015, 1:33am
UPDATED : Sunday, 01 November, 2015, 8:53pm

Up to US$240 billion could flood into the international property market in coming years as China's insurance companies take advantage of loosened regulations to buy real estate worldwide.

Large state-owned companies such as Anbang Insurance Group have already snapped up prestigious property in the United States and Britain, including New York's historic Waldorf Astoria hotel, which was sold for almost US$2 billion in 2014.

It may be just the beginning, as new estimates by investment firm JLL show Chinese insurance companies still have room to dramatically expand their real-estate-asset portfolios.

"We calculated that if Chinese insurance companies were to [reach their full potential], they would be capable of putting about US$240 billion into the international real-estate market over the next 10, 15 or 20 years," JLL global research director David Green-Morgan said.

"They will very quickly become one of the biggest institutional players in the world."

Most Chinese insurance companies invest only between 1 and 7 per cent in direct real estate, compared with up to 15 per cent in European or American funds, but the numbers are growing.

Direct outbound real estate investment by Chinese companies has risen 50 per cent so far this year, compared to the same period last year.

As of October, US$15.6 billion had been spent worldwide, a number which Green-Morgan said they expected to rise to about US$20 billion by the end of the year.

"We haven't seen any significant drop-off in Chinese appetite for real estate investment because of the [yuan] devaluation - if anything, it may have triggered a slight acceleration," said Alistair Meadows, the Asia-Pacific chief for JLL International Capital Group.

Looser government regulations introduced in 2012 allow the country's real estate companies to seek up to 15 per cent of their assets overseas.

According to JLL research, the most appealing cities for Chinese property seekers since last year have been New York, London and Sydney.

In addition to its purchase of the Waldorf Astoria last year, Anbang Insurance bought New York's Merrill Lynch Financial Centre for US$414 million, and Toronto's HSBC tower for US$84 million.

Green-Morgan said he expected an influx of new property investment in Britain from Chinese companies following President Xi Jinping's visit.

"[From the] transactions that we've been directly involved in with the likes of Greenland [Group], the support shown by both the mayor of London's office and the broader British government was definitely a factor in those transactions," he said.