Chinese investment in overseas real estate could drop by as much as 20 percent in 2017 amid tighter capital controls and a slowing economy, according to a new report by property search portal Juwai.
Outbound real estate investment by Chinese firms and individuals reached a record $101.4 billion in 2016, but Juwai expects it to fall to around $80 billion in 2017.
“Chinese restrictions on the transfer of capital overseas, foreign buyer restrictions and taxes in some key markets, and the prospect of a slower Chinese economy are the three main factors that could reduce investment levels from last year,” the report notes.
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The U.S. was the top destination for Chinese overseas real estate investment in 2016, as it had been every year since Juwai began tracking capital flows in 2013.
The Real Deal’s May cover story broke down how recent Chinese capital controls, intended to bolster the country’s currency and discourage risky investments, threaten to curtail investment in the U.S. property market. Last month, the Wall Street Journal reported that Chinese banking regulators are probing three major investors in New York’s real estate market — HNA Group, Anbang Insurance Group and Fosun International — over risky overseas deals.
Anbang, which was reportedly in talks to invest in Kushner Companies’ 666 Fifth Avenue before pulling out earlier this year, appears to be a particular target for regulators. In June, Chinese banks were reportedly ordered to stop doing business with the insurer.
Juwai estimates that individuals accounted for around two-thirds of Chinese investment in the U.S. in 2016, but they too face new hurdles. In late 2016, regulators closed a popular loophole that allowed people to evade capital controls by pooling money from friends and relatives — a practice called “smurfing.”