Asian Investment Boosts European Real Estate Markets

• 31 December 2015
• Local News
• 954 Views

PROPERTY FOCUS I ASIAN IN BRIEF

Massive capital flow from east to west is driving investment and growth in European property markets according to experts who gathered at an Urban Land Institute Real Estate Trends conference in London last month.

It is estimated that the investment drive from China, Hong Kong, South Korea, Malaysia, and Singapore in particular is twice the level of capital flowing from Europe to Asia. Asia Pacific investors had already reportedly invested US$28.6 billion into European real estate by March this year to diversify assets overseas and offset high exposure at home. This compares to US$12.3 billion in the first half of 2013 which was almost the total for the whole of 2012.

According to statistics from CBRE, if Asian investors increase their total allocation to the real estate sector to 2.5 to 3.5% in the next five years, it could mean an additional $150 billion in direct and indirect investment in real estate globally.

This relatively new trend is partly the result of legislative developments across Asia. Asian Real Estate Investment Trusts (REIT) are big players, with Singaporean REITs having led the way in European investment. Recent changes to Hong Kong REIT legislation signalled a desire to catch up with regional trends in Singapore, Korea and Australia.

After changes in legislation in October 2012 allowing Chinese life insurance companies to invest overseas, these groups are now by far the fastest-growing sector of Asian real estate investors. In April 2013, Ping An purchased the Lloyds building in the City of London for US$446 million and experts predict upwards of a further $3 billion of Chinese investment in London real estate alone by the end of 2014.

London is currently the focus of 75% of potential investment capital, ten times the figure for Paris, though this may not be sustainable. In June, for example, Hong Kong–based Kai Yuan Holdings announced plans to buy the five-star Marriott Hotel Champs Elysées in Paris for €345 million (US$475 million).

According to the experts at the ULI conference, Europe is more attractive to Asian investors than the US because its diverse markets are considered to be less efficient, and so offer greater returns.

This global trend is also playing out in Asia itself. The Asia Pacific Real Estate Emerging Trends 2014 Report produced by Price WaterhouseCooper shows that 88% of all real estate transactions in the first three quarters of 2013 sector came from within the region with the majority being purchased by Chinese investors.