China overtakes Singapore as the largest Asian outbound property investor

China last year surpassed Singapore as the largest source of Asian capital in the global real estate market for the first time, accounting for nearly half of the total US$60 billion investment. However, this year smaller deals might replace the large transactions seen in 2016, according to global real estate service provider CBRE.

Outbound property investment by Chinese institutional investors in 2016 surged more than 56 per cent to US$28.2 billion from US$18.1 billion in 2015, CBRE said in its Asian outbound investment report released on Tuesday. Singapore’s investment last year dropped 35 per cent to US$12 billion, while Hong Kong ranked third with US$8.4 billion.

The appreciating US dollar, combined with the previous policy that allowed Chinese financial institutions to invest in overseas property, and the rising demand for global asset allocation, were factors that contributed to Chinese firms accounting for four of the top 10 largest outbound deals in 2016. In the biggest deal, Anbang Insurance purchased Strategic Hotels and Resorts for US$6.5 billion.

Insurance companies have been one of the major growth drivers behind China’s outbound investment.

Office and hotel assets remained the major focus of Chinese investors, accounting for 85 per cent of China’s capital outflows last year, CBRE said. The US retained its position as the most popular destination, followed by Hong Kong and Britain.

“Despite recent policies by the government restricting Chinese outbound investment, Chinese appetite for global real estate investment will remain solid but more cautious,” said Alan Li, managing director of capital Markets for CBRE greater China. “Instead of larger transactions, Chinese investors may simply opt for a higher number of smaller deals.”

A separate report by property consultants JLL reported that China’s outbound real estate investment surged 53 per cent in 2016 to a record of US$33 billion. The discrepancy between the CBRE and JLL number was due to different methods of tracking investment.

JLL said achieving a similar growth rate in 2017 may be “challenging” given Beijing’s stricter monitoring of capital outflows.