The London-based residential and commercial property consultancy Knight Frank LLP has just published its third Chinese outbound real estate investment report. Entitled Changing Currents, Rising Tides, the report highlighted the continued flow of Chinese outbound capital into real estate markets around the world in the first half of 2016.

Global gateway locations – namely Canada, the United States, the United Kingdom and Australia – have seen undiminished interest from Chinese investors, who are “driven by Chinese economic and policy factors and are attracted by favourable local market conditions in gateway cities.”

The report also noted that while China’s capital outflow control has been a push factor thus far, it may eventually prove to be a double-edged sword. “Stringent requirements have made it difficult for some investors to secure foreign exchange clearance,” the report noted.

According to Matt Whitby, head of research and consulting at Knight Frank, “The volume of Chinese investment in Australia is down considerably year-on-year because of a lack of mega-deals in the first half, as large deals such as the Investa portfolio dragged the 2015 number higher.”

Whitby did acknowledge there remained a strong Chinese appetite for en-block commercial properties in Sydney and Melbourne. Investors from the mainland continued to be attracted by robust rental growth and strong tenant demand, as well as an acute supply shortage.

Chinese investors and developers spent US$1.7 billion in Australia in the first half of 2016 – a 37% decline year-on-year. As for office and hotel transactions, the volume of office deals dropped 65% and hotel deals dropped 42% year-over-year. These declines were largely due to the absence of billion-dollar mega deals made by Chinese investors this year.  

Nevertheless, Chinese and other Asian capital remain drawn largely to Sydney and Melbourne’s office markets, given their limited supply and rental growth prospects. Chinese developers are also interested in diversifying into income producing properties.

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