China takes No 2 spot in overseas property investment

Outbound real estate investment around the world has slowed as stock market volatility dampened appetite, but that has not stopped Chinese companies from being one of the top spenders in foreign properties.

Chinese investment in commercial property and land deals totalled US$3.5 billion in the first quarter of this year, down 20.5 per cent year on year, according to figures from real estate agency Jones Lang LaSalle.

Still, China moved up one spot to become the second-most active cross-border investor after Germany.

In the first quarter of last year, the United States and Canada outpaced China and Germany by a wide margin, each investing more than US$7 billion in overseas properties, compared with China’s US$4.4 billion.

“The Canadians and the Americans were the big investors outside their countries [this time last year], but that’s really dropped back because of the ­volatility in the stock markets and the North American capital is much more sensitive to movements in the equity market,” said David Green-Morgan, director of global capital markets research at JLL.

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Money from Chinese companies has been flooding into the international property market as buyers embrace the country’s “go global” ethos. They are also spurred by fears of a depreciating yuan.

“Last year, we recorded US$25 billion worth of Chinese outbound activity, and I think we’ll be very close to, if not beating, that figure again in 2016,” Green-Morgan said.

New York, London and Hong Kong were the top three destinations for Chinese capital last year, accounting for almost half of the money spent, JLL data showed.

State-owned Anbang Insurance, which is expected to close a US$6.5 billion deal on US-based luxury chain Strategic Hotels later this year, already set the record for the most expensive purchase of an American hotel by snapping up New York’s Waldorf Astoria for US$1.95 billion last year.

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The insurer recently backed out of a takeover bid for Starwood Hotels & Resorts that was worth almost US$14 billion.

Although the group cited “market considerations”, Green-Morgan said the deal would have been in breach of Chinese insurance regulation of a 15 per cent cap in foreign asset ownership.

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Another emerging trend is that Chinese companies are spending more money on real estate outside the country than within it.

At least 61 per cent of the country’s real estate investments were spent overseas, JLL data on commercial transactions of more than US$5 million showed, compared with just 19 per cent in 2011.

Green-Morgan said the growth in China’s acquisition activity would slow as companies focused on building, selling and managing the developments.