HONG KONG—In Q2, Mainland Chinese real estate investment overseas (MCREIO) continued to trend downward with just $4.3 billion being deployed, according to the latest “China Outbound Investment” report released by Cushman & Wakefield.
Increased government scrutiny that took effect on March 1, 2018, was not seen this time to be the main culprit of declining volume. In fact, tightened controls on lending had a more significant impact in Q2, according to the report.
Hong Kong again took pole position, maintaining its leading streak for the fourth quarter in a row and accounting for almost 80% of global MCREIO investment in Q2. The report shows that MCREIO into the U.S. decelerated further to just $81 million in Q2 as one office and one residential deal traded. Nevertheless, Cushman & Wakefield views current impediments to greater investment as transient and maintains an optimistic view for MCREIO investment in the U.S. over the long term.
Following the tightened controls on real estate funding, the firm has revised its forecast downward to reflect an anticipated drop of MCREIO investment volume in 2018 vs. 2017 by around 40% to 50%.
Jason Zhang, head of China outbound investment & advisory services, Cushman & Wakefield, said: “‘Things may get worse before they get better. Domestic pressure will force developers to be more cautions and selective when investing overseas, while geopolitical issues will negatively impact investment, mainly into the U.S. market for the remainder of the year.”
James Shepherd, managing director of Greater China research, Cushman & Wakefield, said: “Although updates to the National Development and Reform Commission (NDRC) website suggest that the Chinese government might be easing outbound policy controls (companies are now permitted to invest overseas as long as they are recycling capital from an existing property investment or where funding is raised from non-Chinese banks), we do not expect such updates will significant impact the relatively low outbound investment activities compared to the previous years.”
