Chinese capital was responsible for 11 percent of all global cross-border real estate investments last year, second only to the United States (19 percent). Chinese capital accounted for USD 26.6 billion of cross-border real estate transactions last year, accounting for nearly 40 percent of all Asian capital invested. And also more than half what was invested domestically in China, says a report by Knight Frank titled Active Capital.
Asian real estate investors have launched themselves onto the global stage over the last few years to become one of the most important global capital exporters, with Singapore (7 percent), Hong Kong (5 percent) and South Korea (3 percent) also in the top ten. However it Chinese capital that has been the key driving force behind global real estate transaction volumes over the past few years, especially across the Super City1 markets, according to Knight Frank’s Active Capital research report.
Despite recent geo-economic uncertainties around the world, Chinese appetite for mega-assets seems insatiable. However, some target locations are beginning to feel uneasy around the sustainability of Chinese investment as questions are being raised on the government’s latest capital outflow controls and the health of the domestic economy.
With recent deals involving Chinese capital including HNA Groups purchase of the iconic 245 Park Avenue in New York for USD 2.21 billion, CC Land’s acquisition of The Leadenhall Building, also known as the Cheesegrater in London for £1.15 billion and China Investment Corporation’s securing Blackstone’s European logistics business Logicor for more than €12bn (£10.5bn), capital outflow controls are not proving a hinderance. Also, the latest Chinese GDP growth figure, 6.9 percent YoY growth in the first quarter this year, has dispelled doubts on the country’s overall economic health. Some of the previous concerns, such as the domestic home inventory glut, paled in comparison with impacts of external surprises like Brexit and the US election result. Even those shocks have now been gradually digested as investors have taken advantage of factors such as exchange rate dips, the report says.
Andrew Sim, Head of Global Capital Markets, Knight Frank, commented: “Only a couple of years ago the global marketplace was crowded with big name Chinese insurance firms, large developers and State Owned Enterprises (SOEs). However, since 2015 we have seen more determined advances, even dominance in some markets, by private conglomerates or developers including HNA, Fosun and R&F.
“This group of investors and developers are nimble, are able to make decisions quickly and often transacting higher up the risk curve. Instead of heeding a coordinated national drive as with the SOEs, they have grown more sophisticated in their own strategies and calculations for projects. We expect to begin to see less of a rush for trophy assets and more methodical behaviours that are commonly observed from mature players,” he said.