Global Gateway Cities to See “Quantum Leap” in Chinese Real Estate Buys

Asia’s real estate investors are entering a new phase which will see a major surge of acquisitions by Chinese firms in a broader range of locations, according to a report released recently by property consultancy Colliers International.

“Chinese outbound property investments beyond Asia really took off in 2009, and they reached US$ 9 billion in 2013,” said Terence Tang, Managing Director of Capital Markets and Investment Services, Asia at Colliers International. “We think the world’s ‘gateway’ cities will see a quantum leap in real estate purchases by Chinese buyers in 2014.”

Catching the Second Wave

The Colliers report divides the trend toward international investment by Asia’s real estate investors into two waves.

According to the agency, the first wave of investments, which started in 2000, targeted existing assets, or purchases of units in other companies’ developments in London and Sydney.

In the second wave, investors are expected to expand their scope of interest to the fringe areas of gateway cities, such as the east end of London and downtown markets in Manhattan, where investors will find prices more attractive than those in traditional core locations.

Colliers sees the emerging trend as diversifying beyond purchases of existing assets to include outbound investors entering non-traditional sectors and committing to value-adding schemes, including conversion and development opportunities. While sticking to the gateway cities, the agency notes an expansion by Chinese investors beyond the core areas into the secondary locations of gateway cities.

Push and Pull Factors for Investment

“Besides increasing global liquidity, the volume of outbound investments from Asia is being driven by both ‘pull’ and ‘push’ factors,” explained Piers Brunner, Chief Executive Officer, Asia at Colliers International.

“The main ‘pull’ factors are the higher yields available in the primegateway cities of the US, Europe and Australia, the growth potential of property there, and the high level of transparency.

“The ‘push’ factors are the likelihood that the governments of HongKong and Singapore will keep existing local real estate cooling measures in place this year, and the relaxation of government policies concerning overseas real estate investments in Asian countries,” he adds.