Chinese investors already made US$5.89 billion in real estate investments in the US this year, and a recent change in the country’s investment regulations promises to make that figure look small by this time in 2014.
Data released by consulting firm Rhodium Group this month showed that Chinese firms investments from January to October this year were nearly six times the US$996 million spent during 2011 and 2012 combined.
Rule Change to Open the Taps
While China’s investments in international real estate during 2013 dwarfed the numbers for earlier years, a new law put in place in December takes away the need for central government approval of outbound investments from China of less than US$1 billion, except for cases involving designated countries or industries.
The new regulation, “Catalogue for Investment Projects to be Approved by the Government,” raises the ceiling on investments needing approval by the National Development and Reform Commission (NDRC) from US$100 million to $1 billion.
This change will allow for many more investments such as Greenland Group’s acquistion of properties in New York, Los Angeles, Melbourne and Sydney, or Fosun’s purchase of the Chase Manhattan building in New York. (Fosun’s $725 million buy of the One Chase Manhattan Plaza was just finalised on December 18th, and the company’s CEO indicated that the company intends to make more such acquistions).
In an interview with the media in Hong Kong, Mao Tong, a partner at US law firm Squire Sanders, said: “The latest relaxation is quite significant. Increasingly, many outbound investments from China now require more than US$100 million.This policy change seems particularly helpful for Chinese investors to invest in the United States and Europe, where investment projects often require between US$100 million and US$1 billion.”
Looking Forward to 2014
So while the Rhodium Group’s findings for 2013 are significant, by December 2014, there’s a good chance we will be looking at reports that indicate Chinese investment in overseas real estate during the year exceeded the totals for the previous three or four years combined.
And all of this investment may have an impact on pricing. In the residential sector, figures from the US’ National Association of Realtors already shows Chinese buyers to be the second largest foreign investors in US real estate, and some studies have shown that mainland buyers are showing increasing interest in some US markets, including San Francisco.
Please check back with Mingtiandi next year this time to see if I’m right.