• 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 million.

• 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.

HONGKONG, CHINA - Media OutReach - 1 August 2018 - In Q2, Mainland Chinese Real Estate Investment Overseas, hereafterreferred to as "MCREIO",continued to trend downwards with just US$4.3 billion being deployed, accordingto the latest China Outbound Investment report released by Cushman &Wakefield.

Increased government scrutiny that took effect on 1March 2018 (New Measures for the Administration of Outbound Investment(Regulation No.11)) was not seen this time to be the main culprit of decliningvolume. In fact, tightened controls on lending (following the Guidance onRegulating Financial Institutions and Asset Management Business) had a moresignificant impact in Q2.

Surprisingly,in Q2 the office sector staged a comeback in comparison to Q1 with US$3.6billion of investment recorded, up 44% q-o-q. Over the remainder of the year,we expect limited Mainland Chinese investment activity in the office sectorunless acquisitions are being made for self-use or offshore capital is beingrecycled. As expected, Q2 development activity took a sharpdive 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 Chinesereal estate lending environment improves.

Hong Kong againtook pole position, maintaining its leading streak for the fourth quarter in arow and accounting for almost 80% of global MCREIO investment in Q2. The officesector remained by far the most favored commercial asset class, accounting for88% of investment into the city. Due to a lack of en-bloc investmentopportunities in core areas, the focus shifted to quality assets indecentralized areas PRC developers also shifted their focus from publicland sales tender of development sites to acquiring blocks of residential unitsfor future redevelopment purposes.

The reportshows that MCREIO into the USA decelerated further to just US$81 million in Q2as one office and one residential deal traded. Nevertheless,we view current impediments to greater investment as transient and maintain anoptimistic view for MCREIO investment in the USA over the long term.

Following the tightened controls on real estatefunding, we have revised our forecast downwards to reflect an anticipated dropof MCREIO investment volume in 2018 vs 2017 by around 40% to 50%.

Jason Zhang, Headof China Outbound Investment & Advisory Services, Cushman & Wakefield,  said: "'Things may get worse before they get better.'  Domestic pressure will force developers to bemore cautions and selective when investing overseas, while geopolitical issueswill negatively impact investment, mainly into the US market for the remainderof the year."

JamesShepherd, Managing Director of Greater China Research, Cushman &Wakefield, said: "Althoughupdates to the National Development and Reform Commission (NDRC) websitesuggest that the Chinese Government might be easing outbound policy controls(companies are now permitted to invest overseas as long as they are recyclingcapital from an existing property investment or where funding is raised fromnon-Chinese banks), we do not expect such updates will significant impact therelatively low outbound investment activities compared to the previous years."

Click HEREto view the full report.            

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