Chinese property investors still getting overseas deals done despite tighter capital controls, says ING

PUBLISHED : Tuesday, 28 February, 2017, 2:01pm
UPDATED : Tuesday, 28 February, 2017, 7:32pm

Chinese real estate investors are still getting overseas deals done even after the central government tightened its grip on outbound property investments to curb capital outflows and support the weak yuan, according to a global real estate financier.

Global property markets can expect another big year from Chinese buyers with the largest institutional investors little affected by tighter capital controls, according to executives at ING, a Dutch bank that finances real estate purchases.

“It doesn’t impact our business a great deal,” said Robert Scholten, head of real estate finance for Asia Pacific at ING Bank. “[Institutional investors] will continue to invest in overseas real estate and many of them have overseas sources of income as well, which will help to fund those investments.”

ING’s real estate finance arm targets transactions with property value above 100 million (US$105 million).

Last year, China’s overseas commercial and residential property investment hit a record of US$33 billion, a 53 per cent increase from 2015, according to global real estate group JLL.

The US was the most popular destination, followed by Hong Kong, Malaysia and Australia.

However, a similar growth rate this year could be challenging given central government moves to monitor capital outflows, according to JLL.

As the yuan tumbled to eight-year lows late last year, Chinese regulators warned of “irrational” offshore property investments and pledged to step up the review process for sending capital offshore.

In January, outbound real estate investment by Chinese firms dropped 84.3 per cent year on year, official data showed.

[Institutional investors] will continue to invest in overseas real estate and many of them have overseas sources of income as well, which will help to fund those investments
Robert Scholten, ING Bank

Despite the scrutiny, Scholten said mainland insurers and pension funds will continue snapping up office space and logistics centres in other countries to achieve higher yields.

These institutional investors have been contributing the most to China’s outbound buying spree.

In 2016, Anbang Insurance purchased Strategic Hotels and Resorts, which owns New York’s JW Marriott Essex House and Washington’s Four Seasons, for US$6.5 billion.

China Investment Corporation, the country’s US$800 billion sovereign wealth fund, has also been active in the New York office sector, according to JLL.

Michael Shields, head of real estate for the US, UK and Asia Pacific at ING Bank, said the US is likely to remain the top choice of mainland investors because of the market transparency, high liquidity and the large amount of assets available for sale.

Asian real estate investors largely perceive US president Donald Trump in a positive way, expecting his business-friendly policies to boost property prices, Shields said.

“They are concerned (about Trump) in general,” Shields said. “But I don’t think it is impacting investment decisions yet on large real estate transactions.

“People are more focused on the prospects of economic growth through simplification of corporate tax rates. That should feed into real estate.”