A weakening local and regional market could spur more Chinese investors to look at foreign markets for opportunities this year. International property firm Jones Lang LaSalle predicts that Chinese investors are likely to buy $20 billion worth of properties overseas in 2015, up 21% year-on-year.
Chinese overseas investment in real estate was nearly $16.5 billion in 2014, a 46% increase compared to the previous year.
Europe was the leading choice for Chinese investors, with total property investments of US$5.5 billion in 2014. London is the favourite city for Chinese buyers, but they are also investing heavily in properties in Portugal and Spain.
According to a survey by online portal Global Property Guide, four of the five strongest housing markets in the third quarter of 2014 were in Europe. In all, seventeen European markets showed improved performance suggesting that the continent is back as a key haven for property investors.
Australia is another favourite property buying destination for Chinese investors, and they have also become the largest source of foreign cash in the United States residential real estate market. However, the US housing market’s upward momentum is slowing sharply which could lead to reduction of interest from the Chinese.
The US house price index rose by just 2.76% y-o-y in Q3 2014, the lowest annual increase in the past eight quarters. US residential construction activity and property
transactions are also slowing.
Similarly, things are not looking rosy closer to home as housing markets across Asia continue to lose steam. Only a handful of Asian markets performed better in terms of momentum than the previous year, while most lost momentum.
Asian countries which showed minimal house price increases included Vietnam, with house prices
rising by 1.45% during the year to Q3 2014, South Korea (0.59%) and Tokyo, Japan (0.49%).
China’s once booming property market is now weakening significantly. In Beijing the price index of second-hand residential buildings fell by 4.11% during the year to Q3 2014, in sharp contrast with the spectacular growth of 14.26% over the same period last year. During the latest quarter house prices in Beijing fell by 3.83%.
New home prices fell in 69 of 70 cities in the first nine months of 2014, compared to the same period in 2013, with an average price decline of 5.1% based on data from the National Bureau of Statistics (NBS).
All of this suggests that global Chinese investors are likely to focus more intensely on European
markets in the coming year, and the UK is likely to be the chief benefactor of the large sums flowing out of China.
Market watchers say that apart from the domestic real estate buyers, property developers and insurers are also behind this overseas buying spree.
In 2012, the China Insurance Regulatory Commission allowed insurance companies to invest
in real estate outside of mainland China and Hong Kong, which has prompted them to move their assets overseas.
For example, Ping An Insurance Group’s acquisitions recently included the Tower Place office block in London for £327 million and Lloyds of London. Anbang Insurance Group has is buying New York City’s Waldorf Astoria hotel for US$1.95 billion.
Overall, real estate accounted for 20% of total investment made by insurance companies overseas.