Chinese buyers spent more on commercial real estate outside China than in 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.
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.Â Â
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."Â
The fall was also recorded despite the decision in October last year to relax mortgage lending rules.Â
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.
Chinese real estate investors used 2014 to internationalise their portfolios– Darren Xia, Jones Lang LaSalle
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."Â
JLL’s research has been supported by a number of eye catching projects announced in the past two months.Â Â
One is Greenland’s purchase at the end of last month of 52ha of prime waterfront land in the Malaysian island of Iskandar, off the coast of Singapore, for $670m. The land is intended to be the site of the $820m first phase of the Tebrau Bay Waterfront City project, which will include a snow-world theme park, an opera house, a hospital specialising in traditional Chinese medicine and a school.Â Â
That deal was done in conjunction with state-linked Malaysian developer Iskandar Waterfront. The previous month, another Chinese developer, Country Garden Holdings, bought 11ha of land from Iskandar with an estimated development value of $5bn.Â Â
Elsewhere, a relatively unknown Chinese developer called Oceanwide announced at the end of January that it was to develop twin towers in the centre of San Francisco (pictured). The Beijing-based developer bought the site for $296m and has recently announced that a 186,000 square metre scheme designed by Foster + Partners would be constructed.Â Â
The scheme, which is called First and Mission, will include apartments, a hotel, offices and retail space. The centrepiece will be twin towers, which will be 277m and 184m high. The taller of them will be the second highest in the city. As with Iskandar, the attraction is the region’s growth prospects: rental yields in San Francisco are rising at an annual rate of more than 5%, the highest anywhere in the US apart from San Jose, also in California.Â
These two schemes also illustrate a growing trend for Chinese developers to become involved in construction schemes, rather than investing in existing buildings. This is also the case in New York, whereÂ Greenland is funding the lion’s share of a $5bn apartment development in Brooklyn, and China Overseas is planning the tallest building in New Jersey, a 95-storey condominium at 99 Hudson Street.Â
Photograph: 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)