Februar 4th, 2016
Giant_Panda_Eating – Wikipedia – by Chen Wu from Shanghai, China
China’s Real Estate investors and Germany
Yesterday ChemChina offered €40 billion for Switzerland’s Syngenta -in the agribusiness a huge global supplier of pesticides and seeds. If the offer is accepted – ‘Syngenta’s Board have advised share holders to accept the offer – then the deal would be the largest overseas takeover ever carried out by a Chinese corporation.
Also yesterday, the transfer of Atletico Madrid’s football player Jackson Martinez’s €40m transfer from Atletico Madrid to Guangzhou Evergrande has again shown – if indeed further proof were needed – that China has arrived on the world stage big-time and they are carrying big wallets! The Colombian just became the latest prominent player to make a move to the ‘Chinese Super League’.
Chinese investors in German Real Estate
Next Estate GmbH is a Berlin based Real Estate company that focuses on local Berlin real estate requirements of clients in Germany and worldwide. An important aspect of real-estate world wide are institutional and private Chinese investors.
Total Chinese mergers and acquisitions have totaled circa €62 billion so far this year – the strongest volume yet for the same corresponding period in previous years – and some are forecasting a record in 2016.
According to German government statistics, Chinese direct investment in Germany amounted to circa 1.4 billion in 2014 and has focused on mechanical engineering, electronics /consumer goods and information and communication technology.http://www.auswaertiges-amt.de/EN/Aussenpolitik/Laender/Laenderinfos/01-Nodes/China_node.html
Mingtiandi is an independent Chinese source for China real estate intelligence. In an article entitled „Asians Move into German Real Estate with $1.27B in Investment“ it cited data from property consultancy JLL;“The firm recorded 70 Asian purchases of German real estate last year, with the bulk of the deals involving Chinese and Korean investors. Of these acquisitions, 27 percent were in Berlin, 23 percent in Frankfurt, and 9 percent in Munich as well as a number of portfolio deals stretched across multiple cities.“ http://www.mingtiandi.com/real-estate/outbound-investment/asians-move-into-german-real-estate-with-1-27b-in-investment/
Chinese money is often not easy to recognize as such as it comes in through diverse investment vehicles created outside of China. Most of the properties were commercial real estate and exactly how much money originated in PRC is not clear because many of the funds flow from Beijing through Hong Kong.
China’s capital expenditure has dropped
However not all is well. China’s capital expenditure has dropped and there have been some signs of deflation and labour-market weakness while manufacturing activity have clearly slowed down.
Many also believe another devaluation for the Yuan-Renminbi is inevitable, making it increasingly important for cogent observers to follow China’s capital outflow.
Chinese citizens have increased their offshore investments which are reportedly currently around €26 billion . The Chinese Yuan-Renminbi has been stuck in a depreciative trend in comparison to the Euro and the dollar– which has resulted in large capital outflows and it is not only Chinese real-estate developers that have realized the existential threat of keeping all their investments within China.
International real-estate property value optimism however and pricing remain resilient as stock markets decline.
Chinese property investors in Vancouver and elsewhere
Best known perhaps, even notorious, are Chinese property investors in the Canadian west-coast city of Vancouver. An example of the really outrageous market is this residential „$2.398-million fixer-upper“ in the Point Grey neighbourhood where the lot was assessed at CDN$2.1-million and the house itself at CDN$45,500 or respectively €30,000 and €1.4 million! http://www.theglobeandmail.com/report-on-business/economy/housing/inside-the-vancouver-fixer-upper-listed-for24-million/article28519528/
We will follow up with reports on this blog about Chinese Real Estate investments in Europe generally. This article from the ‚Jing Daily‘ follows how luxury properties may fare in the following year – „The cities with luxury real estate markets most vulnerable to the China slowdown are Shanghai and Sydney. As Chinese luxury real estate buyers fan the globe, Singapore, Hong Kong, Paris, New York, and London are also considered at a “high” risk level in relation to China’s economy.“ https://jingdaily.com/china-slowdown-looms-large-over-global-luxury-real-estate-market-for-2016/#.VrNfEGzSk5s
Another view perhaps from Paul Hastings LLP via Lexology – „So, where did we stand at the end of 2015? It is likely that, absent one of those black swan events, the trend of increasing China outbound real estate investment and the loosening of restrictions on inbound China real estate investment will continue.https://www.lexology.com/library/detail.aspx?g=371fc673-cbb9-42ad-8493-bc19a286447b
2016 will be the “Year of the Monkey”
China is getting ready for its own Lunar New Year – 2016 will be the “Year of the Monkey” next month and with China’s weaker economic data, stronger capital controls and renewed currency confusion, China will keep everyone wondering how this will affect their real-estate investments world-wide. We at Next-Estate in Berlin will follow this theme in further blog postings.