China's developers extend global reach

9 February 2015
The skyline of San Francisco’s financial district, which is soon going to make room for two more, Chinese, towers (Basil D Soufi/Wikimedia Commons)

Chinese buyers spent more on commercial real estate outside China than in their own country for the first time last year.

Sales for Greenland Group and China Vanke, China’s two largest property developers, have both risen sharply over the past year, and both have broken through the $35bn mark, with Greenland overtaking Vanke to become the country’s largest developer.

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According to figures released by property research institute China Index Academy, turnover at the state-owned Greenland Group rose 48% to $38bn, and sales at the listed residential developer China Vanke rose 23% to $35bn. Sales at the third place enterprise, Dalian Wanda, grew 74% to $24bn.

These performances were achieved despite the weak state of China’s residential market: prices in December fell 0.4% year on year, the first decline since housing data was made public in 2005. However, it has led to speculation that there will be some capital flight from the mainland to other areas of the world.  

Zhang Hongwei, the research director of Shanghai-based property consultancy ToSpur, said in a research note: “Amid the lacklustre market in 2014, many property developers chose to reach their sales targets by lowering prices, so the high sales volume came at the cost of narrowed profit margins.” 

The fall was also recorded despite the decision in October last year to relax mortgage lending rules. 

Global reach 

There is evidence that the biggest developers are becoming a force in global property markets. Research by Jones Lang LaSalle (JLL) released on 26 January predicted that Chinese investors would spend a total of $20bn on foreign property, a rise of 21% on 2014, which itself was a 46% increase on 2013. Indeed, 2014 was the first time that Chinese buyers have spent more on commercial real estate outside of China than inside.

According to JLL, Europe topped the list of favourite investment destinations last year, attracting over $5.5bn. However, Australia emerged as a fast growing market, with more than $3bn flowing into the country, and Sydney becoming the second biggest recipient of Chinese money after London; $2.5bn was allocated to the Americas.

Darren Xia, head of JLL’s International Capital Group, China said: “Chinese real estate investors used 2014 to internationalise their portfolios. At a time when residential prices dampened the market, diversification in international markets allows Chinese investors to continue to grow sustainably and ensure long-term returns. Notably, activity once again focused on the major cities of the world, which Chinese investors now know well, such as London, Sydney, and the major US metropolitans of New York, San Francisco, Los Angeles and Chicago.”

Read the rest of the article at GCR

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