Despite market turbulence back home, Chinese buyers continue to snap up real estate in major western markets. Transaction volume reached $30 billion in 2015, double the levels seen in 2014 according to Knight Frank's latest research. "The key gateway locations of New York's Manhattan, London, Australian cities of Sydney and Melbourne all account for more than 40% of last year's transactions," says Paul Hart, executive director of Greater China at the property consultancy firm.
The report noted that amongst Chinese buyers (composed of major developers, insurers, sovereign wealth funds and more) was an increase of developers and insurance companies participating in major deals. In the top 20 players that made offshore investments in 2015, 14 were developers (up from ten in the previous year) and six were insurance companies (up from four in the previous year).
While developers were more active in deals, Knight Frank highlighted the staggering transactions made by Chinese insurance giants in pursuit of trophy assets. "Now insurers dominate purchasing in the six of the top ten deals [done around the world]," says Hart. Those mega-transactions include Anbang Insurance's string of high-profile acquisitions such as the iconic hotel Waldorf Astoria for $1.95 billion; Heron Tower in London for $1.172 billion plus its $414 million purchase of Merrily Lynch Financial Center in Manhattan. In the same year, Taiping Life Insurance bought luxury apartments on 111 Murray Street for $820 million. Overall, Chinese insurers spent $4 billion on real estate abroad, double the amount spent in 2014 at $2 billion.
"We are starting to see the beginning of levels of investment by insurance companies," he says adding that these entities will become a dominant force for many years ahead. "It's an extremely positive thing for the Chinese consumer as it allows people to diversify their risk away from domestic risks by investing in other countries; it gives people the freedom of choice in investment," adds Hart.
Political support from Beijing have been integral to perpetuating this trend. In 2012, China permitted domestic insurers to invest in real estate abroad for the first time. In the following years, China's Insurance Regulatory Commission loosened restrictions further so domestic insurers can deploy more capital overseas.
The report forecasts that Chinese property investment abroad will continue to be strong in 2016, a trend driven by domestic factors including economic woes in China that are pushing companies to diversify and invest offshore.
New York surpassed London, Sydney and Melbourne as the No.1 destination for Chinese investment. Manhattan captured the bulk of Chinese capital at $5.78 billion in 2015, a five-fold increase from the year before. While the major Chinese institutions have dominated transactions in the Big, Knight Frank's research also noted moves made by small-to-mid-cap companies and developers to regional US hubs outside of Manhattan such as Boston, Los Angeles and Chicago.
"These [smaller, lesser known Chinese] brands struggled to find deals in Manhattan because the deal sizes are significantly larger and the investment yields are lower so they go to these other important [regional] hubs and achieve very quick and easy access to stock at lower price points and more favourable returns," says Hart.