Home and away

Property investment in and out of Asia rises on the back of Chinese and regional buyers' interests

Property markets in Asia are starting to feel the impact of China's new rich, and it is not hard to see why, analysts say.

As lending tightens for second and third homes in the mainland, Chinese investors are now looking overseas. At the same time, developers seeking higher returns on their investments are looking beyond China, too.

According to Chinese real estate portal Juwai.com, the United States remains the lead destination for Chinese investors, followed by Australia and Canada. Thailand, Malaysia and Singapore are the only Southeast Asian countries included in Juwai.com's top 10 preferred destinations of Chinese investors.

Jeffrey Gao, China property analyst with Nomura Securities, says that as growth starts to slow in China's property market, investors are looking overseas.

"Developers in China are finding it tough to get financing for new projects," he says. "As a result, margins are being squeezed. The more wealthy Chinese are now looking overseas to invest in property where yields and prices are very attractive."

Louis Kuijs, chief China economist at the Royal Bank of Scotland, says added reasons for Chinese investors moving offshore are the "cooling off of the domestic real estate sector and a less bullish outlook for it".

"Cooling measures at home have driven investors in the Chinese mainland to search for opportunities outside of China," says Lee Lay Keng, director and regional head of research with DTZ, a property services provider.

Property consultantcy Jones Lang LaSalle says Chinese investors spent $7.6 billion on global real estate last year, an increase of 124 percent over 2012.

"The outbound trend continues to increase," says David Green-Morgan, global capital markets research director for Jones Lang LaSalle. "We believe it could easily surpass $10 billion in 2014, as evidenced by (the Oct 6) deal with Anbang Insurance buying the Waldorf Astoria Hotel in New York for $1.95 billion."

Real estate is benefiting from the easing of restrictions in China on outbound investment, according to Green-Morgan.

"Many Chinese investors have never had the opportunity to invest overseas before, so they are looking at a range of opportunities," he says.

He explains that real estate investment is something investors have been doing in China for many years. Going overseas is, therefore, a natural extension.

"Australia and Malaysia are two countries where we see a substantial amount of Chinese investment, particularly into residential development," Green-Morgan says. "Australia has also seen quite a flow of commercial investment, but these two countries stand out at the moment."

Kuijs from RBS says that apart from investing in the more traditional markets such as the US and the United Kingdom, Chinese investors are also buying in Asia.

China, however, is not the only country in the region investing in global real estate.

Asia's real estate investors are extending their geographical boundaries to include the US, Australia and countries in Europe as they pour increasing amounts of money from their home markets into markets around the world, according to Colliers International's latest white paper, "Riding the Next Wave of Asian Buying Spree".

"Whereas they traditionally focused on their home country or region, the total value of their investments elsewhere in the world has grown continuously in recent years, from around $1 billion at the beginning of the century to more than $30 billion in 2013," the paper says.

From January to September this year, the total volume of Asian business has been worth about $30 billion, says Simon Lo, executive director for Asia research and advisory at Colliers International, a global real estate company. Of that amount, some $7 billion came from China, he says.

"The actual number should be much higher than this if we include the sales and purchase by developers and acquisition of non-real estate companies that may include significant real estate assets."

Lo cites a number of reasons why Asian investment capital is going outbound: "Different economic cycles between Asia and the Western world, geographical diversification, better yields and investment returns, and the relaxation of government regulations on overseas investments."

Investors from Hong Kong, the Chinese mainland and Singapore have been the region's biggest buyers of real estate outside Asia, and they are set to remain key sources in the next few years, according to analysts.

They say more Chinese investors are set to jump on the bandwagon, simply because they now feel more comfortable about venturing their capital into overseas real estate markets.