In­vestors shift­ing fo­cus in global re­alty pur­chases

China Daily (Canada) - - FRONT PAGE - ByWUYIYAO in Shang­hai wuyiyao@chi­nadaily.com.cn

Chi­nese in­vestors have been mov­ing from core of­fice and res­i­den­tial de­vel­op­ments into leisure and industrial as­sets when they seek op­por­tu­ni­ties in over­seas re­alty mar­kets, a study said.

Knight Frank, a re­alty ser­vices provider, said a num­ber of re­cent in­vest­ment hot spots have shown a dis­count in prime res­i­den­tial prices com­pared with key Chi­nese gate­way cities such as Bei­jing and Shang­hai.

“In Los An­ge­les and Miami, prime apart­ment prices are both about 25 per­cent lower than Shang­hai, drawing sig­nif­i­cant in­ter­est from high net worth in­di­vid­u­als in China,” said Do­minic Ong, se­nior direc­tor of Asian mar­kets at Knight Frank Australia.

In terms of the at­trac­tive­ness of in­vest­ment, us­ing the bench­marks of prime of­fice yields and the spread over the 10-year bond yield, non-core cities such as Frank­furt in­Ger­many, Hous­ton in the United States and Bris­bane in Australia may rank higher than the hot spots such as Lon­don and NewYork, ac­cord­ing toKnight Frank data.

“Many pro­vin­cial cap­i­tals and key cities in Australia, the United States and the United King­dom have now pre­sented a bet­ter yield spread, which is the gap be­tween the yield re­turn from prop­erty in­vest­ment over bond re­turns, than the gate­way cities of Lon­don, New York, Syd­ney and Mel­bourne,” said David Ji, direc­tor and head of re­search forChina at Knight Frank.

The de­sire to di­ver­sify risk into var­i­ous mar­kets, build brand in­ter­na­tion­ally and help man­age fu­ture oc­cu­pa­tion costs are also push­ing in­sti­tu­tional in­vestors to in­crease out­ward real es­tate in­vest­ment, the re­port said.

Chi­nese out­ward real es­tate in­vest­ment sky­rock­eted from $600 mil­lion in 2009 to about $15 bil­lion last year, Knight Frank said. So far, this in­vest­men­thas been fo­cused in gate­way cities in Australia, the US and the UK, the re­port said.

In 2014, Australia recorded the strong­est growth in in­bound real es­tate in­vest­ment from China, with a rise of more than 60 per­cent yearon-year.

Mar­ket ob­servers said that Chi­nese in­vestors, whether they are in­sti­tu­tions such as banks and in­sur­ance firms or su­per-rich in­di­vid­u­als, have been di­ver­si­fy­ing in many lo­ca­tions. Small and medi­um­sized State-owned de­vel­op­ers and pri­vate de­vel­op­ers are also ex­pand­ing over­seas and look into more di­ver­si­fied lo­cal mar­kets.

Chi­nese in­vestors are shift­ing to­ward sus­tain­able longterm re­turns and tak­ing more fac­tors into con­sid­er­a­tion than just price ap­pre­ci­a­tion, mar­ket an­a­lysts said.

“Many Chi­nese in­di­vid­ual in­vestors have been look­ing into op­por­tu­ni­ties in eu­ro­zone coun­tries in­clud­ing Por­tu­gal and Spain amid the ren­minbi’s ap­pre­ci­a­tion against the euro,” said Liu Feng, se­nior vice-pres­i­dent of Cred­itEase, a wealth man­age­ment and credit man­age­ment ser­vices firm.

Ex­change rates, in­ter­est rates, yields and rental growth are all taken into con­sid­er­a­tion by Chi­nese in­vestors when mak­ing a de­ci­sion about where to buy over­seas, said an­a­lysts.

Re­searchers said that although China’s out­ward in­vest­ment has surged, buy­ers fromChina are­some­times fac­ing fierce com­pe­ti­tion from buy­ers from other coun­tries and re­gions.

In Lon­don, Chi­nese buy­ers ac­count for about 20 per­cent of the prop­er­ties sold to for­eign buy­ers, but clients from the Mid­dle East are tak­ing a larger share, ac­cord­ing to Yolande Barnes, a direc­tor at Sav­ill­sWorld Re­search.

Paul Guest, head of re­search and strat­egy for theAsia-Pa­cific re­gion with LaSalle In­vest­ment Man­age­ment, said Chi­nese in­vestors are also look­ing at op­por­tu­ni­ties in Asian cities in­clud­ing Tokyo, Sin­ga­pore and Seoul.

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