Chinese property investors expand their horizons due to COVID-19

While the COVID-19 pandemic is having detrimental effects on the real estate sector across the world, Chinese investors continue to search the world for good deals although overall deal closings fell during the first quarter of 2020.

Traditionally, the top five outbound destinations for Chinese investors have been the US, the UK, Hong Kong, Australia and Germany, according to JLL’s outbound investment data from 2007 to 2019. However, first-quarter data ranked Hong Kong, Poland, the US, Germany, and Serbia as the top five destinations based on investment volume.

“Hong Kong remains as the first place with two development site transactions purchased by mainland developers that took up 58 per cent of total investment volume,” said Darren Xia, Head of International Capital Coverage at JLL North Asia.

He added that the ranking wasn’t quite 100 per cent as the transaction volumes overall were limited in the first quarter and some deal closings were delayed due to COVID-19.

For most of the Chinese outbound investors, Xia said their general investment mindset is “wait and see”. “They are less likely to make immediate investment decisions, but they are closely monitoring the global market and will be the first mover once the market is recovered.”

Chinese overseas investors have been quiet after the Chinese government imposed capital controls, said Leo Chung, Associate Director, Research, Asia Pacific CBRE.

“I do not think that they changed their interests in terms of destination,” he said, noting that the US, the UK, Hong Kong and Australia had been the focus markets.

However, the top five markets for which the Chinese property portal received most enquiries in the first quarter are Thailand, Australia, the US, Canada, and the UK.

“These are the markets with the most total Chinese buyer enquiry, not necessarily those with the highest rates of growth,” said Georg Chmiel, Executive Chairman, Juwai IQI.

Describing 2020 as “an unusual year,” he continued: “Because the forecast is so uncertain and the coronavirus could yet have unforeseen impacts in the months to come, there could be further changes in Chinese buyer demand as the year progresses.”

Commercial focus

Within the development site category, except for Hong Kong residential site, JLL data shows the remaining sites are all future developments of logistics, manufacturing and industrial business parks. Together with 20 per cent of direct acquisition of the industrial asset, the total percentage of industrial/logistics is over 30 per cent.

“As logistics sector is expected to be relatively resilient compared with other sectors during COVID-19, there is now growing interest of outbound investors in this sector,” said JLL’s Xia.

Justin Eng, Associate Director at Knight Frank Asia Pacific, noted that based on the transaction volume compiled by Real Capital Analytics, the preference seemed to be for the office, industrial, retail, hotel and residential assets, in that order.

Whereas, data gathered from industry and governmental sources reveals that 40 per cent of Chinese overseas real estate investment was dedicated to commercial property and 60 per cent to residential real estate. “That includes all classes of acquirers, whether corporate, state-owned, or private,” said Chmiel.

CBRE’s Chung noted that senior housing has become a focus area for Chinese investors.

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Source: ZAWYA

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