Singapore-based investors were Asia’s most active group of offshore real estate investors in 2018, contributing US$21.6 billion ($29.4 billion) of the region’s total outbound investment, according to a report by CBRE on March 7.
“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,” says Yvonne Siew, executive director of global capital markets for Asia-Pacific, CBRE.
Singapore-based capital contributed to 40% of Asia’s total outbound investment in 2018, which fell by 36% y-o-y to US$53.8 billion. The decline stemmed from Chinese investors who deployed US$7.5 billion in capital to offshore real estate investments, compared to US$35.4 billion in 2017.
Chinese investors are rebalancing their real estate portfolios and transitioning into net sellers of real estate to strengthen balance sheets and recycle capital for deployment into future outbound investments, says CBRE.
Investors from Malaysia and India also injected more capital overseas, increasingly their total capital investments in 2018 by 132% y-o-y and 291% y-o-y respectively, while Korean investors allocated capital worth US$7.3 billion, compared to US$6.3 billion in 2017.
Infographic by CBRE
“The Asian outbound investment story in 2018 was, on the one hand, characterised by a clear moderation from China, but on the other hand, represented cyclical portfolio rebalancing and strategically preparation for future activity,” says Leo Chung, associate director of research at Asia Pacific, CBRE. “The pull-back from China’s investors was not entirely unexpected but encouragingly created opportunities for new strategic investors to amplify offshore investment activities.”
London remained the top destination for Asian capital, and investors from Hong Kong, Singapore, and Korea accounted for over 85% of investment activities in the metropolis last year. About 18% of total Asian outbound capital was deployed to London in 2018, compared to 13% in 2017. At the same time, 9% went to Hong Kong, 9% to Shanghai, and 4% went to Frankfurt real estate investments.
Infographic by CBRE
Geographically, the Europe-Middle East-Africa (EMEA) region attracted US$21.5 billion in total capital from Asian investors. Intra-Asian investments recorded US$17 billion, with the Americas at US$11.6 billion, and the Pacific region at US$ 3.7 billion.
“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,” says Tom Moffat, Asia head of capital markets at CBRE.