Chinese investors are selling off real estate holdings across the globe in order to raise cash amid a deepening property crisis. The crisis has caused the worldwide slump in borrowing-cost hikes, resulting in more than $1 trillion in office property values being wiped out. The lack of property sales has also caused concern amongst regulators and the market as to whether it is concealing large, unrealized losses, potentially impacting not only banks but asset owners as well. In an effort to raise capital for debt repayment and domestic operations, a new batch of Chinese-owned overseas assets are being sold at steep discounts, including a 45% discount to the 2021 purchase price of a plot in Toronto late last year.
This selling off of Chinese-owned real estate is resulting in a pickup of distressed assets being brought to market, as evidenced by the recent sales of a £1.34 billion property project in London and an office block in Canary Wharf being offered at 60% less than its 2017 sale price. Some of these assets are being sold for less than their original value, posing potential losses for their owners. Furthermore, a luxury development in Mayfair, London, majority-owned by Chinese investors, recently defaulted on its loans before collapsing into administration. As more of these distressed assets come to market, market transparency and price discovery are expected to see improvements.
These sales are not confined to Europe, with more sales taking place in Australia as well, indicating that the problem of property distress is not unique to a single region or country. The properties that are being sold are being marketed as part of a portfolio optimization strategy, implying that they are being offloaded for the purpose of overall financial management. The influx of properties like these to the market is expected to have significant impacts, with valuers having to consider the extent of these sales in their assessments of the market.
