- Mainland Chinese Real Estate Investment
Oversea, hereafter referred to as "MCREIO" continued to trend downwards
with just US$4.3 billion being deployed.
- MCREIO into the U.S. continued to trend
at exceptionally low levels, down again from Q1 to total just US$81
- Tightening lending environment have a
severe impact on the domestic real estate developers which led to a sharp
decrease in overseas development site acquisitions this quarter.
KONG, CHINA - Media OutReach - 1 August 2018 - In Q2, Mainland Chinese Real Estate Investment Overseas, hereafter
referred to as "MCREIO",
continued to trend downwards with just US$4.3 billion being deployed, according
to the latest China Outbound Investment report released by Cushman &
Increased government scrutiny that took effect on 1
March 2018 (New Measures for the Administration of Outbound Investment
(Regulation No.11)) was not seen this time to be the main culprit of declining
volume. In fact, tightened controls on lending (following the Guidance on
Regulating Financial Institutions and Asset Management Business) had a more
significant impact in Q2.
in Q2 the office sector staged a comeback in comparison to Q1 with US$3.6
billion of investment recorded, up 44% q-o-q. Over the remainder of the year,
we expect limited Mainland Chinese investment activity in the office sector
unless acquisitions are being made for self-use or offshore capital is being
recycled. As expected, Q2 development activity took a sharp
dive given tightened liquidity. Just US$91 million was deployed in Q2, down 98%
y-o-y. We forecast this to return in the mid term assuming the mainland Chinese
real estate lending environment improves.
Hong Kong again
took pole position, maintaining its leading streak for the fourth quarter in a
row and accounting for almost 80% of global MCREIO investment in Q2. The office
sector remained by far the most favored commercial asset class, accounting for
88% of investment into the city. Due to a lack of en-bloc investment
opportunities in core areas, the focus shifted to quality assets in
decentralized areas PRC developers also shifted their focus from public
land sales tender of development sites to acquiring blocks of residential units
for future redevelopment purposes.
shows that MCREIO into the USA decelerated further to just US$81 million in Q2
as one office and one residential deal traded. Nevertheless,
we view current impediments to greater investment as transient and maintain an
optimistic view for MCREIO investment in the USA over the long term.
Following the tightened controls on real estate
funding, we have revised our forecast downwards to reflect an anticipated drop
of MCREIO investment volume in 2018 vs 2017 by around 40% to 50%.
Jason Zhang, Head
of China Outbound Investment & Advisory Services, Cushman & Wakefield, said: "'Things may get worse before they get better.' Domestic pressure will force developers to be
more cautions and selective when investing overseas, while geopolitical issues
will negatively impact investment, mainly into the US market for the remainder
of the year."
Shepherd, Managing Director of Greater China Research, Cushman &
Wakefield, said: "Although
updates to the National Development and Reform Commission (NDRC) website
suggest that the Chinese Government might be easing outbound policy controls
(companies are now permitted to invest overseas as long as they are recycling
capital from an existing property investment or where funding is raised from
non-Chinese banks), we do not expect such updates will significant impact the
relatively low outbound investment activities compared to the previous years."
to view the full report.
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