THE cooling real-estate market in China has prompted mainland Chinese investors to put their cash to work in overseas properties, with Singapore emerging the second most-preferred outbound destination in Asia after Hong Kong.
Abundant liquidity among developers, investment institutions and wealthy individual investors, supported by a rising renminbi, are also driving the current capital outflow, Cushman & Wakefield said.
From 2008 till June this year, the Chinese pumped US$3.23 billion (S$4.18 billion) into Singapore’s real-estate market. Half of that was spent on development sites and nearly a quarter (23.8 per cent) on retail assets, said the property consultancy.
This trails the US$3.84 billion put into Hong Kong real estate by mainland Chinese investors over the same period.
A string of high profile deals by Greenland Holding, China Vanke, Dalian Wanda, Country Garden and Fosun International have drawn attention to the growing presence of Chinese investors in global real estate.
Overall, Chinese investors spent US$33.7 billion on 353 deals from January 2008 to June 2014.
The US$5.1 billion spent in the first half of this year was almost equivalent to the amount spent for the whole of 2012.
The most popular investment models for Chinese investors are greenfield investment and mergers and acquisitions, Cushman & Wakefield said in a recent report.
Private enterprises and individuals accounted for 62.6 per cent of the total value of outbound investments, and state-owned enterprises, 37.4 per cent.
Chinese investors seem to prefer mature markets: The US was the top destination for Chinese real-estate dollars, registering 124 deals worth US$9.72 billion; of this, more than US$7.05 billion was spent in 2013 alone.
This is followed by the UK (US$5.8 billion), which accounted for 62.7 per cent of the total Chinese real-estate investments in Europe.
Cushman noted that the Chinese have also warmed up to South-east Asia, given its proximity to China and its strong presence of ethnic Chinese communities. Malaysia has also emerged a hotspot, with Chinese investors pouring in US$2.07 billion there over the same period.
While Chinese investors are generally drawn to strata-titled offices in Singapore, they prefer land development in Malaysia, Cushman noted.
In Europe, Chinese investors favour commercial real estate.
Shanghai-based, state-owned Greenland stood out for its aggressive moves in recent years, including a US$500 million residential project in Sydney in 2013 and the US$1 billion mixed-use Metropolis project in Los Angeles. Shenzhen-based Vanke teamed up with New York’s Tishman Speyer to build a luxury condominium in San Francisco last year.
After Beijing gave the go-ahead to Chinese insurers to invest a percentage of their assets in prime commercial assets, Ping An insurance snapped up London’s iconic Lloyd’s Building in 2013 for £260 million (S$528 million); China Life jointly acquired a landmark office tower in London’s Canary Wharf with Qatar Holding at £795 million this year.
Cushman said it expects the Chinese outbound investment trend to continue, as wealthy individuals and cash-rich companies look further afield to diversify and expand their global presence. Smaller and lesser known firms are also starting to follow the trail blazed by top-tier developers and investors.
The property consultancy pointed out however, that while the impetus for outbound investment among Chinese investors was strong, challenges are in the way. The lengthy approval procedure to transfer large sums of money out of China is “a significant issue” in fast-moving markets, where deals need to be closed quickly.
“Chinese investors also face a steep learning curve with differences in corporate and management cultures, divergent business practices and unfamiliarity with foreign legal and regulatory environments,” Cushman said.