Research - NOVEMBER 9, 2017

Chinese outbound real estate investment falls 51%

by Andrea Waitrovich

Chinese outbound real estate investment fell 51 percent year-over-year to $2.5 billion in third quarter 2017, the lowest total in 14 quarters, according to Cushman & Wakefield. The decline came amid new outbound investment restrictions and investor caution prior to the 19th Party Congress meetings in Beijing.

The Chinese government ramped up efforts to control overseas real estate investment, issuing Circular 74 in August in the midst of third quarter. This was the second regulation announced in nine months that sought to restrict outbound investment capital flows, branding overseas real estate investment as a “limited” category though not “prohibited”.

Circular 74 appeared to focus in some respects on promoting the Belt & Road Initiative and made special reference to logistics and R&D hub investment overseas. Though this is not thought to make reference specifically to logistics or R&D hub real estate investment, it is possible that going forward this may support the business case for Mainland Chinese overseas real estate investments that target such sectors.

Three quarters into 2017, cumulative Mainland Chinese real estate transaction volume of $18.2 billion is approximately half that of 2016’s total for the full year.

Office investment received just a 28 percent share of third quarter Mainland Chinese outbound real estate investment volume, down a substantial 83 percent quarter-over-quarter. Mainland Chinese investors did not acquire any overseas trophy offices in the third quarter.

Surprisingly, Mainland Chinese investment in logistics (industrial sector) remained relatively muted at $1.1 billion through the first three quarters of 2017.

Australia took first place by destination as Chinese investors targeted development sites with a 63 percent share by asset category. Development sites also accounted for the overwhelming share of investment into the second place United Kingdom and Hong Kong, which fell to third place. Canada placed fourth and investors deployed $192 million into the United States, which dropped three places to fifth during the quarter.


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