Chinese outbound real estate investment plummets

During the third quarter, Mainland Chinese real estate investment overseas (MCREIO) continued to trend downwards, totaling $2.6 billion being deployed, according to Cushman & Wakefield.

Hong Kong attracted the lion’s share, accounting
for 73 percent of the total MCREIO volume, followed by Australia and the United States, which accounted for 22 percent and 5 percent, respectively.

There were no major MCREIO transactions in the United Kingdom during the third quarter 2018; however, some U.K. transactions are currently in the final phases of closing and are expected to complete during the fourth quarter 2018.

On the back of both ongoing controls on outbound investment and a clampdown on lending to real estate developers and investors, MCREIO transaction volume in third quarter 2018 fell 41 percent quarter-over-quarter to a total of 31 deals closed. Similarly, the average size of each transaction fell significantly to $87 million in third quarter, down from an average of $161 million in second quarter.

As forecasted in second quarter, MCREIO investors refocused their attention on Hong Kong and Australia. Surprisingly, countries linked to the Belt & Road Initiative saw no major transactions by MCREIO investors. MCREIO into the United States continued to trend at exceptionally low levels, totaling $119 million for third quarter.

Despite ongoing investment activity, the trend of divestment of overseas assets continued as Chinese investors sought to reduce debt. In third quarter, Cushman & Wakefield calculate that approximately $2.1 billion of overseas real estate assets were sold by MCREIO investors. This suggests a near-even level of outflow vs. inflow of real estate investment from mainland China by MCREIO investors, on the assumption all funds from disposals were repatriated.

To read the report, click here.