Chinese insurers tiptoe into property market

PUBLISHED : Monday, 17 February, 2014, 4:47am
UPDATED : Monday, 17 February, 2014, 4:47am

Mainland insurers are off to a slow start in property investments in and outside the country as they gradually build up specialised teams and pin down strategies following a relaxation of policies by state authorities.

In 2012, the industry regulator allowed them to put as much as 20 per cent of their assets under management - 8.3 trillion yuan (HK$10.5 trillion) by the end of 2013 - into the property market. Data from the top insurers, China Life Insurance and Ping An Insurance, showed property investment was only at a low single-digit percentage of their overall portfolio.

"That's a realistic approach. The key point is it's not a race. It's about doing things well rather than quickly," said David Hand, an international director of capital markets at Jones Lang LaSalle.

Hand has worked with several large mainland insurers as they look to build up the expertise and teams required to invest in and manage real estate assets during his 11-year stay in Beijing. He moved back to Hong Kong last year.

"We see less and less hurdles remaining while procedural approval from the industry regulator is still usually required for overseas and larger domestic acquisitions," he said, adding that mainland insurers would likely follow the global trend of investing in office buildings first, and then moving into mixed-use projects and other sectors of the market at a more mature stage to diversify their portfolios.

On that front, Ping An, the mainland's No2 life insurer, bought the Lloyd's Building in London in July last year for £260 million (HK$3.4 billion), the first direct overseas property deal by a Chinese insurer. No other transactions have been announced yet, although domestic media has reported that China Life is also close to a deal in London.

"At the moment, all are still studying the market and trying to understand what are the ways to access the market," said Philip Charls, chief executive of the European Public Real Estate Association. "Buying property directly is one, there are also other options, such as debt, joint ventures and buying stocks of listed companies."

He said there was strong interest from Chinese insurers in the overseas property market, particularly in gateway cities such as London and New York.

Back home, the insurers are keen to invest in senior housing projects that fit their long-term plans and have strong demand from the country's ageing population.

Mainland insurers had invested five billion yuan in senior housing by the end of October last year, said Jia Biao, an official at the China Insurance Regulatory Commission.

"Currently, insurers' investment in the senior housing sector is still at an early stage," Jia told a conference in Beijing in December last year.

The majority of insurance firms' domestic property holdings are in the office market. For example, China Life bought from Shui On Land in December a 99 per cent stake in a proposed 790,000-square-metre mixed-use project in Shanghai's Taipingqiao for more than 3.32 billion yuan, while Sunshine Life Insurance purchased from Shui On an office building and parking spaces in Chongqing for more than 2.41 billion yuan.

Neither Ping An nor China Life were available to comment.