PERE Asia: China outbound continues to dominate

Capital sources from China will continue to deploy large swaths of capital into real estate markets despite current restrictions on outbound investment, according to panelists at the PERE Asia Summit in Hong Kong.

During the conference's morning session, speakers highlighted the extra scrutiny on cross-border capital flows and rigorous government inspections, but all agreed this would only moderate China’s overseas real estate activity in the short term.

“Despite recent policies by the government restricting Chinese outbound investment, there continues to be a steady flow of Chinese capital overseas as investors seek to diversify their portfolios,” said Yvonne Siew, executive director, CBRE Global Capital Markets.

Data released by CBRE on Tuesday revealed that Asian outbound real estate investment was dominated by Chinese investors in 2016, accounting for 47 percent of total investment, or $28.2 billion.

And while this record figure may not be matched in 2017, the long-term trend for Chinese capital sources is likely to continue unabated.

Beng Tiong Ng, assistant Group chief executive ARA and the chief executive of the Singapore-listed property company’s private funds division, pointed to the increasing insurance premiums being collected by Chinese insurers as a growing capital source.

The trend will see Chinese investors look to deploy capital in gateway cities globally, seeking a core return risk profile.

“There’s a flight to safety with money going to gateway cities,” said Ng.

In 2016 the office sector remained the most-preferred asset class for Asian investors, accounting for half of overall investment, according to CBRE data. Gateway cities of London, New York and Hong Kong were the top three destinations for office investment.

However, panelists did point toward an increasing appetite for alternative real estate asset classes among Chinese investors. ARA’s Ng said that as yields compress in the traditional sectors, more focus will be placed in asset classes such as student accommodation, adding that investment managers with operating expertise will be at a fundraising advantage as these areas attract more attention.