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Chinese go on global property spree
Brief:Transaction volumes across the world are expected to rise 15 per cent this year to $600bn, thanks in large part to a significant jump in Chinese overseas investment.
The global commercial property market owes the Chinese a collective hug.
 
Transaction volumes across the world are expected to rise 15 per cent this year to $600bn, thanks in large part to a significant jump in Chinese overseas investment.
 
Knight Frank, the property consultancy, predicts that Chinese money flowing into international property will double before the year is out, with the number of deals originating from China expected to reach their highest levels since 2007.
 
Peter MacColl, the consultancy’s global head of capital markets, refers to the rise in outbound Asian capital – particularly from China – as “seismic”, adding that the flow of capital into commercial property shows no signs of slowing.
 
Knight Frank has an obvious interest in talking up the market, but it is clear that MacColl’s argument has substance. Indeed, demand is even stronger in the residential sector: in April, the Chinese became the biggest foreign buyers of apartments in Manhattan, United Stated for the first time, according to estimates from property brokers – a title that once belonged to the Russians.
 
All this is welcome news for investors, but comes at a time when China’s own property market appears vulnerable and its economy continues to splutter, begging the question of whether investors should be worried about China’s hold over the global property sector.
 
Some perspective is needed, however. While Chinese investment in overseas deals is set to double this year to $30bn, that figure will still only make up some 5 per cent of total transaction volumes – a number many investment experts are comfortable with.
 
Richard Gwilliam, head of property research at the real estate arm of M&G, the asset manager, says: “Global property is not over-reliant on Chinese buyers and investors have little reason to worry.”
 
He points out that in the majority of markets, purchases are still predominantly carried out by domestic investors and, even if this were not the case, investment from China has a long way to run.
 
“Recent legislation in China has made it easier for Chinese insurers to invest in overseas real estate,” Gwilliam says. “There is massive potential from this source of capital. Even if China’s economy was to see a slowdown, investment in overseas property would still probably grow rapidly. Arguably, it could increase at a faster rate in this scenario, as Chinese investors look to diversify away from their home economy.”

FT.com
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