Chinese Q1 investment in APAC plummets 76%

Capital controls in China were a key factor causing an overwhelming drop in Chinese outbound investment in Asia Pacific in the first quarter, research by CBRE has shown.

Chinese investment in Asia Pacific property markets totalled $550 million in the first quarter of this year, a 76 percent drop from the $2.3 billion recorded in the first quarter of 2016, according to CBRE’s latest quarterly data.

The real estate consultancy said there were fewer big-ticket transactions recorded in the first three months of this year amid tighter controls on capital outflows.

“I think that the major slowdown of Chinese outbound investment is related to the capital control,” commented Robert Fong, director of research, CBRE Asia Pacific. “Some transactions which are expected to conclude by Chinese investors in Q1 2017 were put on hold or lapsed.”

Fong also added that with the Chinese government closely monitoring capital outflows, including the large-scale deals, there has been a visible shift in smaller-sized deals below $250 million in a bid to avoid regulatory scrutiny.

On the other hand, outbound investment from Hong Kong in the region picked up pace in the last quarter. Several of the private real estate funds raised by Hong Kong managers deployed capital in Japan, while two listed Hong Kong companies acquired office assets in Singapore, the report said.

Overall, the total investment turnover in Q1 2017 increased by 6.2 percent year-on-year, which CBRE says reflects positive investor sentiment despite flat year-on-year deal growth.

“Across the region, investment performance was polarized in different markets. Singapore and Japan recorded strong investment activity,” said Henry Chin, head of research, CBRE Asia Pacific.

“More investors are looking to Singapore for counter-cyclical opportunities, and this quarter saw the completion of three major office deals by international investors. In Japan, there was more demand from investors seeking assets for higher yields in cities outside central Tokyo, with Yokohama as a hotspot this quarter.”