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posted on 21 February 2015

Chinese Insurers More Interested in Global Real Estate Markets

Written by , GEI Associate

Asian insurers are showing greater interest in investing global real estate. Asian insurance funds could bring additional 75 billion USD into global real estate markets by 2018. Chinese insurers specifically are facing lower yields and lack of opportunities in their domestic investment market.

Sunshine Insurance Group Co is paying more than 230 million USD for New York's Baccarat Hotel in Manhattan, which becomes one of the most highly valued hotels in the US. It is the second time for Sunshine Company to invest in foreign real estate in the last several months. In November 2014, Sunshine insurance company just bought a Sheraton hotel in Sydney.

Coincidentally, after industry regulator made such investments easier in 2012, other Chinese large insurers like Pin An, An Bang, and China Life insurance company also have been investing in global real estate markets since 2013. Real estate prices in Manhattan and Central London appreciated about 11% and 15% in just nine months through September 2014, and global commercial property transactions reached the highest levels since 2008 (with 700 billion USD last year due to the higher demand from Chinese insurers).

There seems four mean reasons which lead global real estate markets to appeal to Chinese insurance enterprises.

  • First, due to the slowdown of Chinese economic growth and some other pressures built to devalue the yuan, Chinese insurance enterprises would naturally look offshore to maximize their gains.

  • Second, real estates have stable yields. Additionally inflation risk are minimal as commercial real estate values are generally based on income. Western real estate markets present good fundamentals - providing better opportunities for Chinese investors.

  • Third, insurance funds look for high value investments with long duration of returns, which perfectly match the real estate investments.

  • Fourth, real estate investments are easier to manage than a typical business.

Foreign real estate investment is still in its initial stage of development for Chinese insurers. There there are differences between China domestic markets and Western markets, such as culture , legal system, economic environment, government policies, etc. Thus, it is may be necessary for Chinese insurers to build further cooperation with local entities in pursuing real estate investments.

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