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.
Asian real estate investment was dominated by Chinese property investors in 2016, accounting for nearly half of total investment--with 47% or $28.2 billion.
With more scrutiny on cross-border capital flows and rigorous checks by the government which may lengthen the approval process, Chinese outbound real estate investment may moderate, gathering at a more sustainable rate. Instead of larger transactions, Chinese investors may simply opt for a higher number of smaller deals. But still, Chinese appetite for global real estate investment will remain solid but more cautious, with Chinese insurers and qualified Asset Managers being the active institutional investor class.
U.S. remained the most favored destination for Asian capital, drawing just over 40% of the overall total, followed by EMEA as the second-favored at over 20%. Asia--with figures showing an increase of intra-regional activity this year--comprised over 20% of overall investment turnover, up from 20% in 2015, which shows that Asian investors favored to keep more capital within their own region.
New York surpassed London as the top metropolitan destination for outbound investment in 2016; however, it contributed to a smaller share compared to 2015. The total top five destinations--New York, London, Hong Kong, Seoul and Sydney--contributed to 37% of the overall total, a decrease from 42% y-o-y, revealing that investment was spread across more diverse destinations.
Asian investors are now showing more interest and seeking out assets in more diverse markets globally. Compared to 2015, more capital was deployed to alternative gateway cities in search of attractively priced opportunities. Places in Continental Europe such as France and the Netherlands; Chicago, San Francisco and Washington in the U.S.; and Vancouver in Canada, are now on more investor radar screens.
While China, Singapore, Hong Kong and South Korea are still the four major sources of outbound investment capital, we are seeing emerging activity from other markets, such as India. There was a significant uptick of Japanese investment targeted mostly for the U.S. Expect Japan to step-up overseas investment in the year ahead as they are coming off a low base.