As Beijing has stepped up its grip on overseas investment, cash-strapped Chinese companies – big consumers in the global real estate market over the past four years – are faltering.
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Paul Guan, a partner at Paul Hastings, a global law firm, said: “The demand for overseas acquisition no longer exists.” He guides Chinese institutional investors overseas in the real estate industry.
Officials all know that the Chinese government has issued a clear signal that it wants to curb the overseas investment in the real estate industry.
The move will put pressure on prices in key real estate markets, from New York to London. According to Real Capital Analytics, China’s three major overseas destinations for real estate investors in 2016 were the United States, Hong Kong and Australia, while in the past six months the majority of transactions in the United Kingdom and the United States were mainly in the United Kingdom and the United States.
Last year, the Chinese were the largest real estate investors in the United States and Australia, accounting for 25% of the United States and 26% of Australia.
According to Morgan Stanley, they accounted for 25% of all commercial acquisitions in London in 2016, and about 80% of the residential land sold in Hong Kong so far this year has been acquired by Chinese companies. Financial services firms say China’s investment in the city has quadrupled since 2012.
Hans Kang, chief investment officer at InfraRed NF Investment Advisers, said: “Trading volume will definitely fall in hot areas and property prices may also be affected.
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Since 2013, the foreign investment of Chinese enterprises has surged. With the continuous accumulation of foreign exchange reserves, Beijing has pushed more enterprises to go abroad.
However, since 2015, at a time when the Renminbi has been devalued sharply, the real estate bubble in China is worried and there is a problem in the domestic balance of payments, the government has begun to worry about the scale of capital outflows, especially the size of the real estate industry.
There are also worries about companies that borrow money in mainland China to buy overseas assets, which runs counter to Chairman Xi Jinping’s deleveraging.
Kang said: “If the external market fluctuations, which may affect the financial stability of China’s banking system.
In the past few months, policymakers stepped up regulation of “irrational overseas investment” and asked banks to verify the credit risk exposure of a group of active traders such as Wanda, Fosun International, HNA Group and Ampang Insurance Group mouth.
All of these companies have been shopping spreely in the overseas real estate market in recent years.
For example, in 2014, Ampang made headlines for its $ 2 billion acquisition of the Waldorf Astoria hotel in New York.
HNA owns HNA Group at the same time last year to 6.5 billion acquisition of a 25% stake in Hilton Worldwide Holdings. Since November last year, four residential sites in Hong Kong also recorded HK $ 27.2 billion.
Wang Jianlin, one of China’s largest real estate developers, has invested in two large complex projects in Australia since 2014, worth about 2 billion Australian dollars (1.58 billion U.S. dollars).
But right now, these dealmakers find themselves subject to rigorous government scrutiny, their ambitious global plans have come to an abrupt end and their focus is shifting to the domestic market.
Last month, Wang Xiaoming revealed to the financial media Caixin Media that his company will “actively respond to the call of the state and transfer major investments to China” after it sold $ 9.3 billion of assets to its rivals to pay its debts.
After Chinese companies tighten capital controls in Beijing, they will lose their appetite for Hong Kong assets
The global market has felt the decline. According to Morgan Stanley, outbound property investment by Chinese companies in mainland China dropped 82% in the first half from a year earlier, and is expected to decline 84% to $ 1.7 billion throughout the year. In 2016, the total investment amounted to 10.6 billion U.S. dollars.
The report notes that this trend will create resistance to the medium-term prices in Hong Kong, the United States, the United Kingdom and Australia, especially in Manhattan, central London and Hong Kong, the most exposed locations.
Guan Guanjun, a law firm, said the same is true for New York’s high-end residential market
Hit by the loss of Chinese buyers. According to Olson Real Estate, for the first time since October 2012, the company has signed contracts worth more than $ 10 million in Shanghai. Other more positive and believed that the impact of the restrictions will be limited to the relevant market, which will continue to be formed by broader macroeconomic trends and fundamentals.
“Fortunately, the major markets in the United States are still ideally enough that there is no capital flow in one area and the effect should be nominal if all economic and market conditions are normal and healthy,” said Andrew Andrew of Triplemint, a New York real estate agency.
Andrew Feldman said
Chinese investors warn that waiting for the new Silk Road has risen and many Chinese companies have relocated If they want to invest in real estate, they may continue to issue debt or equity through overseas platforms, according to Briggs F executive vice president Ben Briggs Scott International Real Estate “We’re investing in a quieter and more complex way.
” Lam Lam, senior director at Knight Frank, said the restrictions do not prevent Chinese companies from investing abroad. In the long run, going to the world will continue. This will be an important means for Chinese enterprises to diversify risks and achieve sustainable returns. ”