Chinese investment in the UK property sector could beat last year’s £3bn, according to research by CBRE.
Despite the volatility in the Chinese financial market over the summer, Chinese investors returned in force during the final quarter of 2015, investing a total of £900m in London and a further £1.4bn outside the capital.
The trend has continued into 2016, with £740m of transactions expected to complete before the Chinese New Year – including Aldgate Tower, E1, 88 Wood Street, EC2, and 17 Columbus Courtyard, E14.
A further estimated £540m of deals are expected to close after the Chinese New Year, with Q1 2016 Chinese investment totalling £1.3bn within London alone.
Richard Zhang, head of CBRE’s China business team in London, said the controlled slowing of the Chinese economy, attractiveness of sterling and prime large lot size assets meant London was still perceived as a safe haven for capital.
Based on the current strong levels of investment activity, he said total volumes of Chinese investment could even exceed the total £3bn recorded in 2015.
Commenting on the latest London property to be snapped up by Chinese capital, The Helicon, EC2, Zhang said: “This transaction is further evidence of the sustained appetite we are seeing from Chinese investors for prime central London office assets.
“This deal follows Bank of China’s debut London investment deal in 2009 (1 Lothbury, EC2), and reflects the strategy sought by a whole range of Chinese investors to increase their current allocations to overseas real estate – with London at the top of their wish list.”
Zhang said we are likely to see Chinese insurance companies emerge this year as the dominant source of investment capital from China into London property, with the Chinese insurance industry’s assets under management growing rapidly.
For example, as one of the biggest insurers in China, China Life Insurance alone had assets under management of £300bn by 2015 Q4, with growth at £40bn per year.
The current percentage of real estate investment allocation by Chinese insurers is also far less than mature markets’ counterparties, while seven out of 10 top Chinese insurers have in their annual meetings for the first time put overseas investment diversification among their top priority agenda.
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