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Offshore real estate investment – Singapore tops Asia

by • March 8, 2019 • InvestmentComments (0)145

Maintaining its lead in Asian outbound investments in 2H 2018, Singapore-based investors ended the year in top position as the most active group investors for offshore real estate investments.

Overall, Asian offshore real estate investments noticeably moderated for the full year of 2018, driven primarily by re-allocation of portfolios by Chinese investors.

In 2018, total Asian offshore real estate investments declined by 36% year-on-year to US$53.8 billion; of which, Singapore investors contributed about 40% (or US$21.6 billion).

Ms Yvonne Siew, Executive Director of Global Capital Markets, Asia Pacific at CBRE, said, “Singapore is the largest source of Asian capital in global real estate investments in 2018. Driven by limited opportunities and compressed yields in the domestic market, Singapore investors will continue to seek enhanced yields offshore to diversify their portfolios and achieve more sustainable growth. We expect the export of capital to continue in 2019, in view of the modest outlook in the domestic market.”

Similar to their Singapore-based counterparts, Korean investors maintained their buying spree overseas, allocating US$7.3 billion in capital in 2018 versus US$6.3 billion in 2017. Investors from Malaysia and India also became more prominent in 2018, selectively investing more capital overseas, up 132% and 291%, respectively.

Meanwhile, Chinese investors deployed US$7.5 billion in capital into offshore real estate investments in 2018, a significant decline from US$35.4 billion in 2017.

This is on the back of Chinese investors rebalancing real estate portfolios, transitioning into net sellers of real estate to strengthen balance sheets and recycle capital for deployment into future offshore real estate investments.

“The Asian outbound investment story in 2018 was on one hand characterized by a clear moderation from China but on the other hand, represented cyclical portfolio rebalancing and strategically preparation for future activity. The pullback from China’s investors was not entirely unexpected but encouragingly created opportunities for new strategic investors to amplify offshore investment activities,” said Mr Leo Chung, Associate Director, Research, Asia Pacific CBRE.

Geographically, allocations remained consistent year-on-year, in terms of percentage of annual capital deployed. EMEA remained the leading destination for Asian outbound capital in 2018. The region attracted US$21.5 billion in total capital from Asian investors in 2018. Intra-Asian investments finished 2018 at US$17 billion, followed by the Americas at US$11.6 billion and Pacific at US$3.7 billion.

offshore real estate investments

Image credit: Max Pixel

London remained the top destination for Asian capital, owing to strong fundamentals and its established standing as the preferred metropolitan area for first time buyers to invest. Investors from Hong Kong, Singapore and Korea were the major buyers, accounting for over 85% of the investment activities.

In 2018, 18% of total Asian offshore capital was deployed to London, up from 13% in 2017. The appetite for gateway cities was also reflected in Hong Kong (9%), Shanghai (9%) and Frankfurt (4%), growing or maintaining their percentage of total offshore real estate investments deployed for 2018.

“Asia-based investors remain hungry for offshore acquisitions, but will employ a more selective strategy in their overseas purchase activities. The hedging costs into certain countries are also impacting investment flows for many outbound Asian investors,” said Mr Tom Moffat, Head of Capital Markets, Asia, CBRE.

Singaporean real estate investors lead Asian outbound investment in H1 2018

In October last year, the Government of the United Kingdom (UK) announced plans to increase the Stamp Duty Land Tax on foreign buyers.

The policy of increasing Stamp Duty Land Tax aims to increase the current additional tax from 1% to 3%. In announcing the new tax, British Prime Minister Theresa May said 13% of London based homes were bought by foreign buyers; a percentage that is taking much needed housing stock from current residents.

The Stamp Duty Land Tax hopes to address the issue of foreign buyers looking to speculate on the UK housing market, significantly raising housing prices in that country by over 2%. The British Government claimed that this in turn prevents UK residents from being able to afford a property.

In explaining why her government will levy a new Stamp Duty Land Tax on individuals and companies not paying tax in UK, May told the BBC’s Andrew Marr Show that it “cannot be right that those who don’t live in the UK can buy properties as easily as British residents”.

May said: “At the Conservative conference last year, I said I would dedicate my premiership to restoring the British dream, that life should be better for each new generation, and that means fixing our broken housing market. Britain will always be open to people who want to live, work and build a life here.”

She added: “However, it cannot be right that it is as easy for individuals who don’t live in the UK, as well as foreign-based companies, to buy homes as hardworking British residents. For too many people the dream of home ownership has become all too distant and the indignity of rough sleeping remains all too real.”

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