CHINA - Media OutReach - 25 February 2019 - Mainland Chinese Real Estate Investment Overseas (MCREIO) hit a four-year
low of US$15.7 billion in 2018, a marked decline of 63% y-o-y amid weakening
Chinese investor sentiment, tightened policy control and growing economic
headwinds, according to Cushman & Wakefield Research's 2019 Outbound
Investor Intention Survey.
- At the same time of
reining in their spending on overseas real estate, data from Real Capital
Analytics (RCA) show Chinese investors sold off over US$12 billion of overseas
assets in 2018, indicating the start of a massive shift in activity now
weighted more heavily towards disposals. The frenzy of disposal activity was
driven primarily by ongoing stiff policy control back home, led by a clampdown
on lending real estate developers and investors (Chart 1).
- Reinforcing the
significant slowdown in momentum for overseas investment, 84% of investors in
China surveyed by Cushman & Wakefield Research indicated that they had
either frozen or reduced their overseas real estate allocations over the past
year in comparison to 2017.
- By destination, the
U.S. and UK held on to their top-tiered positions, ranking No. 1 and 3 in terms
of sentiment according to the survey results, despite ongoing U.S.-China trade
frictions and Brexit uncertainties (Chart 2).
- According to
RCA/Cushman & Wakefield Research data, the U.S. recorded US$2.3 billion
worth of acquisitions against US$3.1 billion of disposal volume, suggesting a
net outflow of mainland Chinese real estate capital from the U.S.
- Elsewhere, Hong Kong
took first place for the second consecutive year with US$9.5 billion of
investment despite a 20% y-o-y decrease in MCREIO volume, according to
RCA/Cushman & Wakefield Research data.
- On the acquisition
front, the top two sectors of interest remained Office and Residential with
Senior Care leaping three places to take 3rd place in Cushman & Wakefield
Research's survey. Sectors shifting down a gear in terms of sentiment were led
by the Hotel sector, where interest plunged 50%.
- In 2019, Chinese
outbound investment is forecast to remain flat amid the expectation that a tight
real estate lending environment will remain in place and continue to restrict
deployment of mainland Chinese capital globally.
- A clear trend of
caution has emerged looking ahead to 2019, reflected in the current increasing
difficulty in deployment of capital. According to the survey results, 65% of
respondents said that they were significantly or severely impacted by the
prevailing outbound policy control, sharply up from 50% in 2017. Moreover, only
18% of respondents said they believe the lending environment will improve in
Managing Director of Greater China Research, Cushman & Wakefield, said: "We expect that Chinese banks' real estate lending may
remain tight for much of the year ahead, creating an environment that will
clearly continue to restrict deployment of mainland Chinese capital in general
irrespective of geographic location. In a time of tight liquidity back home in
China, Chinese investors are disposing of assets at a global level including
Shepherd added: "Contrary to some market commentators who have assumed that
disposal activity in the U.S. and UK has been a direct result of prevailing
political turmoil, the simple fact is that outside China MCREIO's existing
portfolios are heavily weighted to the U.S. and UK, and therefore disposal
volumes appear remarkably high in these markets."
Shepherd continued: "Ever popular in the hearts of Chinese investors,
Australia had a strong showing, overtaking the UK for third place in terms of
real estate investment in 2018."
Jason Zhang, Head of
China Outbound Investment & Advisory Services, Cushman & Wakefield, said: "Survey results, particularly on sentiment by destinations,
views on RMB appreciation and global gateway property prices, have shown
MCREIOs are becoming more prudent and selective under the guidance of the
government investment policies."
Zhang added: "2019 will continue to be a 'quiet' year in terms of
investment volumes but expect to see more M&A activities in real estate
operation platforms together with their portfolios."
Chart 1－ MCREIO Annual Acquisition vs Disposal
Source: RCA / Cushman & Wakefield Greater China
Chart 2－ C&W Investor Intention Survey -- 2019 MCREIO
Sentiment by Destination
Source: Cushman & Wakefield 2019 Investor Intention Survey
& Wakefield Research's 2019 Outbound Investor Intention Survey collected
responses from around 150 of the top Mainland Chinese Real Estate Investors
Overseas. The survey, conducted during the final quarter of 2018, received
responses from 51 such investors, representing more than RMB280 billion of
to view the full report.
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