Chinese insurance industry to invest USD73 billion in global real estate by 2019

A research report by Cushman and Wakefield has revealed that the Chinese insurance industry is predicted to invest USD73 billion in real estate globally by the year 2019.

Following a series of successful deregulation policies by the Chinese government over the past six years, investment potential has become increasingly expansive.

The China Insurance Regulatory commission (CIRC) first began to allow domestic real estate investment as of October 2009; prior to this, companies were only permitted to own property for self-use.

Today’s regulations permit up to 30 percent of total assets to be allocated to real estate, while 15 percent can be used for overseas investment – providing vast scope for accelerated investment.

At end 2014, total real estate holdings for the Chinese insurance industry accounted for a mere 0.8% of the industry’s total assets under management, which is much lower than the existing permitted allocation of 30 percent. In total, this came to just USD13.4 billion, underscoring the potential for increased expansion in upcoming years.

Research director Nigel Almond of Cushman & Wakefield reported that ‘for the largest five Chinese insurers, total allocations remain low and no greater than 2 percent, with some below 1 percent. Over recent years, investment activity had increased. This can in part be attributed to the liberalisation of foreign investment, which allowed top players to accelerate real estate acquisitions – as well as growth in the value of assets under management. ‘

Two noteworthy recent transactions include the purchase of the historic Waldorf Astoria Hotel in New York by Anbang Insurance for a staggering USD1.95 billion, as well as Ping An Insurance’s purchase of Tower Place in London for a record USD520 million per annum following its purchase of the Lloyd’s of London building in 2013.

The increasingly volatility in equity markets globally will cause mainland insurers to accelerate their real estate investment strategy and overseas markets may well diversify away from domestic holdings. While the largest 15 insurance companies are expected to take the lead into overseas investment, smaller companies are predicted to follow.

Cristine Lai, author of the Cushman and Wakeful report, explains that ‘Major gateway cities will form the initial focus of activity. Current investments in London and New York underscore this move and other leading cities which regularly witness transactions over USD100mn will follow. These include Singapore, Sydney and Toronto in Asia Pacific, and in Europe, activity will expand to Berlin, Frankfurt, Munich and Paris. The north American markets of Chicago, Los Angeles, San Francisco, Toronto and Washington DC will also attract high investment activity’.

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