The Chinese are coming: Insurers expected to pour US$73b into overseas properties

Chinese insurers are expected to spend US$73 billion in acquiring overseas properties over the next five years as they speed up diversification, according to a research report published on Wednesday by real estate services firm DTZ/Cushman & Wakefield.

The report says the recent volatility in equity markets worldwide would prompt mainland Chinese insurers to accelerate their real estate investment strategy, diversifying away from domestic holdings.

“Major gateway cities will form the initial focus of activity. Current investments in London and New York underscore this move. Other leading cities will also regularly witness transactions of over US$100 million,” said Cristine Lai, an analyst at the Asia-Pacific forecasting team of DTZ/Cushman & Wakefield.

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The major cities include Singapore, Sydney and Tokyo in the Asia-Pacific region. Property investment activity will expand to Berlin, Frankfurt, Munich and Paris, according to the team. The North American markets of Chicago, Los Angeles, San Francisco, Toronto and Washington will also attract high investment activity, she said.

Last year, the report said total real estate holdings accounted for 0.8 per cent, or US$13.4 billion, of Chinese insurance industry’s assets under management, well below the permitted allocation of 30 per cent. Just under half of this US$13.4 billion is estimated to have been deployed overseas.

“For the five largest Chinese insurers, total allocations remain low and no greater than two per cent, with some below 1 per cent,” said director and head of capital markets research Nigel Almond.