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Deleveraging boosts opportunities for foreign investors in china

China’s deleveraging campaign gave investors in China’s property market more opportunities to make deals this past year, according to Alvin Yip, president of capital markets for Greater China at Cushman & Wakefield, whose team handled 33 percent more real estate investment transactions in 2018 t

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Published - Jan 2, 2019 5:41 AM

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China’s deleveraging campaign gave investors in China’s property market more opportunities to make deals this past year, according to Alvin Yip, president of capital markets for Greater China at Cushman & Wakefield, whose team handled 33 percent more real estate investment transactions in 2018 than they had the previous year. “When the market was on the rise, we found it more challenging,” Yip said. “With cash in hand, the developers would be reluctant to sell their core assets or the fund managers demand an unrealistic price. It was hard to chase those deals.” With Chinese authorities now tightening lending conditions and tighter regulatory enforcement slowing the country’s housing market, more developers are looking for opportunities to raise capital by selling prime assets which is resulting in an uptick in market activity, according to the veteran broker who, together with his team, assisted with RMB 80 billion worth of transactions in the Greater China market in 2018. “Grade A offices in Beijing were like golden eggs and previously the developers wanted nothing more than holding onto them. They were rare to come by,” Yip noted. Shanghai also saw its share of office mega-deals in 2018 with Singapore’s CapitaLand announcing in November that its Raffles City China Investment Partners III (RCCIP III) fund had formed a 50:50 joint venture with Singapore’s sovereign wealth fund GIC to acquire the Star Harbour International Center project in Shanghai’s Hongkou district for RMB 12.8 billion. Yip added that, for many investors, office buildings in Shanghai and Beijing are the most desirable asset type because of healthy demand from corporate occupiers and the more straight-forward nature of managing office facilities. Of Cushman’s 55 deals in 2018, nearly half came from Shanghai, where international players such as Blackstone find ready partners among local and international asset holders. “Shanghai with its high liquidity is a Chinese city most favoured by foreign capital, which accounted for 60 percent of all transactions this year as Chinese domestic players became less active,” Yip said. During the first three quarters of 2018 foreign investment in Shanghai’s property investment market leapt 83 percent compared to the same period the previous year, according to Cushman & Wakefield research, reaching RMB 23.5 billion in deals from January through the end of September. Yip predicted that global investors will remain active in the China market in 2019. “China represents a sound story to international capital,” Yip continued. “The economy continues to grow, albeit slower. The cities are dynamic and there are lots of new economy players, yet the real estate price is only one third or fourth of that in a more developed Western country. A global increase in real estate asset values is also working in China’s favour, according to Yip. “Traditional insurance funds or pension funds will need to increase their investments in China, if they hope to achieve the expected level of return,” he pointed out.

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