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April 08, 2014

Chinese investment in overseas property to double in 2014

The Move Channel

Dan Johnson

Chinese buyers have been playing an increasingly big role in property markets around the world in the past 12 months, from Europe to Australia.

In recent weeks, authorities Down Under have announced plans to reconsider foreign investment laws in an attempt to reverse the impact of Chinese investors upon property prices. Indeed, a surge of buyers of the country have reportedly helped to push prices beyond the reach of many local house hunters.

A similar move was made recently by Canada, with a reform in regulations prompting other countries such as Romania to call for deterred Chinese investors to head to their real estate market instead.

In America, San Francisco real estate firm Kidder Mathews has teamed up with a non-governmental Chinese organisation to encourage investment in the area.

Indeed, across the whole country, China is the second biggest buyer of property, according to Center for China and Globalization and the Social Sciences Academic Press. One hotspot for Chinese investment is Detroit, which accompanied Philadelphia, New York and Los Angeles in the top five wishlist for buyers, according to one survey.

The UK is not exempt from their attentions, either. As well the well-documented wave of foreign investment in London's property market, Chinese investors are forecast to increase their share of global cross border hotel acquisitions from the current level of 4 per cent to 10 per cent by 2017, according to Savills.

This worldwide trend of Chinese investment in a range of sectors is not set to slow down any time soon, according to Knight Frank.

Peter MacColl, Head of Capital Markets, comments: "The recent increase in outbound Asian capital into both commercial and residential international property has been truly seismic, particularly from China, and shows no sign of slowing down, particularly as 'newer' equity from Taiwan, Korea, and private wealth impacts.

"As 2014 progresses, their range of target markets and tolerance to risk will increase, as they become more comfortable with Tier 2 cities and start to look further afield at new sectors, such as retail. This is driven by a greater acceptance of risk, the fact that pricing is strong in many capital cities and intense competition for stock."

Knight Frank also highlights Taiwanese investment as an important factor in global markets, with markets including CBD offices in major gateway cities such as New York City, London, Paris, Tokyo and Shanghai.

Insurance trust Cathay Life has reportedly received approval to pursue four assets in London and Fubon Life recently suggested it could invest up to US$3bn in overseas property over the next few years.

The amount of investment capital emanating from the Middle East has also increased sharply. Real Capital Analytics data shows that sovereign wealth funds from the Middle East doubled their acquisitions to US$18.8bn in 2013. This trend is expected to continue apace, with the range of target markets likely to broaden.

Investors are showing an increased appetite for risk globally, with a particularly strong upturn in activity in peripheral European markets, notably Spain and Ireland and, to a lesser extent, Italy and Portugal. Indeed, European countries are actively courting the growing level of non-EU investment through a range of citizenship-by-investment schemes, designed to bolster their property markets' struggling recoveries.

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