There has been a huge surge in Chinese outward investment into real estate in recent years, led by the softening of Chinese market conditions and government policy encouraging overseas investment by Chinese firms. This has led to increasing investment levels in gateway markets globally – and particularly in Australia.
According to Knight Frank’s latest report, Chinese Outward Real Estate Investment Globally and into Australia, the total value of Chinese outward real estate investment globally skyrocketed from US$0.6 billion in 2009 to US$16.9 billion in 2014 – 10% higher than 2013 and a substantial 205% increase from 2012. Already over US$7.8 billion has transacted in the first four months of 2015 (data excludes residential dwellings).
Australia in particular has seen an increased investment, with the latest wave diversifying into new destinations such as Brisbane, Gold Coast, Adelaide, Perth and regional suburbs of NSW & VIC
Knight Frank’s Mr Dominic Ong, Senior Director of Asian Markets, Capital Markets, said, “It is expected that 2015 will be another record year for Chinese outward investment, both internationally and into Australia, with the expectation of more than US$20 billion worth of investments transacting globally. So far the majority of the Chinese outward investment has been focused in gateway cities of Australia, the US and the UK.”
According to Mr Ong, “What first started as sovereign funds making exploratory investments has proliferated into buying sprees by Chinese developers, banks, Ultra High Net Worth Individuals and institutional investors, such as insurance companies. By 2020, authorities estimate that the Chinese insurance industry will accumulate a further RMB20 trillion worth of premiums, tripling the current pool size.
“This current wave of equity investors and insurance firms are seeking core, value-add and yield-driven opportunities. Amongst the big-cap players, only four of the top 10 Chinese insurance companies have made offshore investments so far, although the remaining six are considering overseas expansion. Sunshine Insurance Group is the only one to invest in Australia, purchasing the Sheraton on the Park Hotel in Sydney for a record AU$463 million, however we expect these groups to be active on Australia listings in 2015.
“A new group of entities is also emerging as a new wave of capital outflow, constituting not only big-name insurance companies, but also UHNWIs, small- to mid-cap state-owned enterprises (SOEs), and smaller, private developers,” said Mr Ong.
