JLL: Chinese invested more overseas than locally in 2014

For the first time in a decade, Chinese outbound real estate investments surpassed domestic volumes in 2014, as a property slowdown continues to dampen investor sentiment.

Chinese investors ploughed more money into overseas real estate as compared to domestic turf in 2014, bolstered by regulatory reforms and a slowdown in the Chinese property market, a report by Jones Lang LaSalle has estimated. This is the first time in ten years that real estate outflows have surpassed domestic investment volumes in the country. 

Chinese outbound investments surged to over $16.5 billion last year, a 46 percent increase over the volumes in 2013. Domestic real estate transactions, on the other hand, witnessed a drop in investments, most notably in the commercial sector, according to the report. Close to 52 percent of all real estate transactions by Chinese investors in the sector were outbound investments. 

In its global capital flows report released today, the real estate consultancy has further noted that domestic real estate transactions in China declined by 23 percent in the fourth quarter of 2014.

“Chinese real estate investors used 2014 to strategically internationalize their investment portfolios,” said Darren Xia, head of international capital group, China for JLL. “At a time when macro concerns around developers and residential prices dampened the market, diversification in international markets allow Chinese investors to continue to grow sustainably and ensure long-term returns.”

Xia further added that regulatory reforms also contributed to this flight of capital. Insurance liberalization reforms, allowing Chinese insurance companies to invest in real estate, were announced in late 2012, but the approval norms were eased and simplified only in October last year, resulting in an increase in overseas real estate allocations by insurance groups.

Of all asset classes, commercial real estate saw the highest outbound investment, with $11.2 billion invested in overseas market last year. The report said that the maximum demand was for office and hotel assets. Residential developers increased their foreign allocations to $5.3 billion, a 38 percent increase over the previous year. 

Europe attracted much of this capital, with $5.5 billion worth of investment by Chinese buyers in cities such as London. Australia was a near second, with Sydney alone receiving investments totaling $2.2 billion in 2014. 

Xia said that it was only towards the end of 2014 that many of the large real estate deals were executed in these markets.
“The big appreciation of Chinese currency against the Euro and Australian dollars opened up windows of shopping opportunities for developers to snap up assets. People executed large deals in the last two months,” he said.

This trend is estimated to continue this year. David Green, head of global research for the International Capital Group, said that outbound capital volumes could possibly reach $20 billion by the end of 2015.