Foreign realty attracts China investment

Chinese investment in overseas property markets will experience a surge this year partly because of the ongoing tightening measures at home and a rising yuan, industry analysts said.

Terence Tang, managing director of Capital Markets and Investment Services of Asia at Colliers International, believes that Chinese investment in real estate abroad will likely double in 2014 because of the currency appreciation and sustained growth in demand for places with attractive yields.

Brenda Wang, associate director at the research and consultancy department of Savills, also said there would be a dramatic rise in Chinese investments overseas, with the primary destination being the United Kingdom, Australia and Canada.

According to statistics from Colliers International, the total value of outbound real estate investment from China has grown from around 69 million yuan ($11.1 million) in 2008 to more than $16 billion in 2013.

"All signs point to overseas investment from Chinese developers and institutional investors picking up dramatically," said Tang.

Lina Wong, managing director of Colliers' China Investment Services, says developers and institutional investors, among others, have been looking abroad for three main reasons: returns, diversification and the opportunity to create an international image.

"The government will continue to implement property curbs and, at the same time, encourage outbound investment. Under these circumstances, the gradual economic recovery in the United States and Europe creates a perfect time to go aboard," Wong said.

Colliers' statistics show that the US, UK and Australia have been the most popular targets for outbound Chinese capital in the last five years.

The next wave of outbound investment will include an expanded focus within gateway cities - downtown Manhattan or East London, for example - or even an expansion to other cities near the main gateways, such as Seattle and Boston, according to Collier's latest report.

In terms of preferred property sectors, Chinese investors began with overseas residential opportunities, but the gradual economic recovery and growing investment demand have now begun to increase the popularity of commercial real estate.

"An emerging trend is for more outbound investors to take on additional risks in nontraditional property sectors such as hotels," said Wong.

In addition, the business models for outbound investment will become more diversified, shifting from relatively straightforward equity deals to a more complex model that involves development from the ground up in some cases.

"Chinese outbound investors will become more confident and risk-taking as their experience accumulates. We will see an increasing amount of outbound capital and more diversified investment portfolios, aiming to capture the optimal return," Wong added.