The facts speak for themselves. According to a report published by Cushman & Wakefield, a leading property adviser, last week, outbound real estate investment by mainland investors and developers fell 63 per cent last year to US$15.7 billion. This was the lowest level since 2014, the year Anbang Insurance Group, another debt-laden Chinese conglomerate, paid the highest purchase price ever for an American hotel with its acquisition of New York’s Waldorf Astoria for nearly US$2 billion in a deal that came to symbolise Chinese investors’ aggressive bids for landmark properties in the top global cities.

In an indication of the extent to which mainland investors are retrenching, Chinese companies almost became net sellers of global commercial real estate last year, disposing of US$12 billion of overseas assets compared with US$15.7 billion of purchases, the report notes. Moreover, two-thirds of respondents to a survey of leading Chinese investors in overseas property assets conducted by C&W said they were “significantly or severely impacted by the prevailing outbound [investment] policy control, sharply up from 50 per cent in 2017”.

The pullback of mainland investors from global real estate markets has had a discernible impact on capital flows.

A report published by CBRE, another international property adviser, last January noted that while the share of cross-border capital in global real estate transaction volumes last year remained steady at just under 30 per cent, there was a 13 per cent decline in Asian outbound capital due to the significantly lower levels of Chinese investment.

Having been the largest source of cross-border investment in US commercial property in 2016, mainland buyers dropped to the No 4 spot last year, behind Singaporean investors, according to data from Real Capital Analytics, a commercial real estate research firm. Even within the Asia-Pacific region, Singaporean buyers were the largest source of cross-border investment in 2018, displacing Chinese investors who were the No 1 source in the two previous years, data from RCA reveals.

However, the one global real estate market which still experienced a significant inflow of mainland capital last year was Hong Kong, which according to the C&W report accounted for more than 60 per cent of Chinese cross-border property investment, topping America as the destination of choice for mainland outbound investment for the second straight year. While this is partly because the line between mainland and Hong Kong investors has become increasingly blurred in recent years, it is also a consequence of capital controls.

Some prominent Chinese buyers are finding it easier to team up with local investors. A case in point is the acquisition last June of Octa Tower, a landmark office building in Kowloon Bay, by a consortium comprising CC Land, a large mainland developer, and CSI Properties and Asia Standard International group, two Hong Kong developers, in one of Hong Kong’s largest real estate deals last year. The CBRE report notes that “Chinese investors are expected to utilise capital raised offshore and focus on co-investment and joint-venture opportunities, predominantly in Asia”.

Indeed, demand for overseas real estate assets on the part of mainland investors remains strong. According to the C&W survey of Chinese cross-border property investors, while only 2 per cent of respondents believed capital controls will ease this year, the vast majority were of the opinion that Chinese capital is still welcome internationally. Interestingly, demand for property assets in America, where the trade war has deepened hostility towards Chinese investment, is particularly strong, with the US ranked as the most favoured overseas destination for mainland investors this year, the survey notes.

However, Chinese investors now face much stiffer competition from some of their Asian rivals.

Data from RCA published last week showed that South Korean and Singaporean investors – who have supplanted their mainland peers as the main drivers of Asian outbound real estate investment – outbid both local and foreign investors in acquisitions of office buildings across Europe last year.

It is not just mainland investors who are prepared to pay over the odds to gain a foothold in the world’s top real estate markets.

Nicholas Spiro is a partner at Lauressa Advisory