Mainland Chinese investors expected to pull back from overseas real estate in 2020

Institutional investors and developers based in Mainland China are expected to not only slow down their outbound investment into overseas real estate markets, but increase their dispositions, especially with the economic uncertainty arising from COVID-19.

A new survey by Cushman & Wakefield found that 48% of these investors are planning to reduce their investment in international markets in 2020. The Canadian market is no exception, which was already experiencing a slowdown in investment originating from Mainland China prior to the pandemic.

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“[The activities] by Mainland China investors were mainly due to central government policy guidance and tightened lending to real estate developers and operators, and we anticipate this trend of decreasing investments and increasing dispositions to continue in 2020 by Mainland China investors globally,” Jason Zhang, the head of China outbound investment capital markets at Cushman & Wakefield, told Daily Hive.

This is the third consecutive year the number of investors that were increasing their overseas investment dropped, now down to just 13% of respondents. As well, 2019 marked the first year dispositions by Mainland China and Hong Kong investors outweighed acquisitions.

Cushman & Wakefield

Cushman & Wakefield

This comes as China just reported its first GDP contraction since at least 1992, with the first quarter of 2020 seeing the economy shrink by 6.8%.

“The COVID-19 pandemic also has undoubtedly added more obstacles to investing overseas in general for Chinese investors,” he added.

That said, while there will be a significant impact on deal volume in 2020, his firm believes some international markets could recover and become accessible more quickly than others. Certain sectors of the real estate market, such as retail, hotels, and senior care facilities, may also see sector-specific distress.

Attention recently turned to investing in the United Kingdom, with the uncertainty over Brexit representing an opportunity to invest.

Based on their findings, the trade war is not as significant a barrier as may have been reported for Mainland Chinese investment in the United States. Just 35% of investors said trade tensions were prohibitive to ongoing investment, and only 16% plan to reduce their exposure to the American market.