Chinese funds in overseas investment spree
Asian real estate markets, including Thailand, are expected to be among key investment targets of Chinese insurance funds which have over US$14 billion available for overseas real estate investment, according to the latest research from global property advisor CBRE.
Such investment is going to high transparency markets, including the UK, US, Canada, Singapore and Australia, as well as Asian markets with similar cultural backgrounds such as Thailand, Hong Kong, Singapore and Malaysia, the research said.
Given the present scarcity of investable prime properties in first-tier Chinese cities and the short-term risk from the oversupply in second- and third-tier Chinese cities, prime high-end office properties in core international cities are expected to be highly sought after, especially considering the attractive yields they can produce in today's low interest rate environment.
In 2012, the total assets of China's national insurance institutions stood at US$1.2 trillion. New regulations permit these institutions to invest up to 15% of their assets in "non-self-use" real estate. By this measure, there is in excess of $180 billion currently available for real estate investment. Based on patterns of insurance fund allocations witnessed in developed countries in recent years (with most insurance funds typically allocating up to 6% of their assets to direct property investment) and assuming an 80:20 split between domestic and overseas market, it is estimated that Chinese insurers could invest up to US$14.4 billion in overseas real estate, the research said.
Although the number of investable properties in developing regions has increased sharply in recent years, those of high enough quality are still limited in Asia Pacific when compared with North America and Europe. For this reason, Chinese institutional investors are expected to focus on premier office investment opportunities in gateway cities, which are capable of generating stable Return on Investment (ROI) in the short term, such as the premier offices in international gateway cities.