growth in singapore capital offsets slowing chinese foreign investment

growth in singapore capital offsets slowing chinese foreign investment

29 June 2018
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Growth in Singapore capital offsets slowing Chinese foreign investment

Knight Frank’s latest Active Capital Report 2018 has revealed that Singaporean investors have been key in offsetting the slowing of real estate investment by Chinese investors.

The agency’s report reveals that investments made by Singaporean investors have increased 64%, from $US2 billion in 2016 to $US3.3 billion last year. Chinese investment over the same period has halved to $US1.3 billion.

Recently in Australia, Singaporean investors have been involved in acquiring two office towers in Collins St in Melbourne, an office tower in Brisbane (the second major purchase in Brisbane within a 6-month period), and an office tower at 320 Pitt Street in Sydney for $275 million. 

Hong Kong, South Korea, Japan and Switzerland also featured heavily in the report, having increased their real estate investment during the two-year period as well.

These increases in foreign investment also offset a near-halving from the US to $US2.3 billion from $US4.1 billion. Total foreign investment in Australia was pushed higher despite America’s decline. 

"Australia also remains very much in focus for cross-border buyers, and attracted US$6.3 billion of inward investment from elsewhere in the region, up by 4 per cent on 2016," said Ben Burston, Knight Frank's Australia group director for research & consulting.

According to the latest Foreign Investment Review Board (FIRB) figures, the tightening of bank lending to foreigners and tighter Chinese capital controls is having a significant impact on Chinese foreign investment.

Yet despite proposed Chinese investment in Australian real estate halving to $15.2 billion, the country remains the most active. China is still the biggest foreign investor, both by value of approvals, $38.9 billion, and by number of approvals, 9,714 in the 2016-17 year.

Knight Frank’s figures do indicate, however, that the foreign real estate investment market is likely to evolve.

"The coming years will see the reactivation of mandates from a number of regions with significant investment firepower," Mr Burston said. "The re-emergence of Japan as a major investor could reinvigorate cross-border capital flows, even if only a slight additional share of domestic investment finds its way into overseas markets."

The office sector in Melbourne and Sydney, which are both experiencing record vacancy lows, are likely to remain in high demand. The Knight Frank report also indicates that Brisbane, Adelaide and Perth are now drawing investors after a period of leasing recovery.

"While rising US interest rates and escalating trade tensions remain risks for global real estate investors, the macro-economic fundamentals in Australia remain supportive for real estate," said joint head of institutional sales Ben Schubert. 

"Robust growth, improving transport infrastructure and a constrained development pipeline are all underpinning investor confidence."

Interestingly, the Knight Frank report also revealed that in the period between 2014 and 2015, Chinese outbound global investment capital more than doubled from US$8.8 billion to US$19.4 billion. In 2016 this figure rose by 51% to US$29.2 billion.

Last year, the figure rose by just 8% to $US31.5 billion.

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