RCA: Europe’s share of global cross-border capital fell 30% in 2018

Global cross-border capital flows into Europe fell back 30% in Europe driven by a substantial tail-off in acquisitions from China, according to new data by Real Capital Analytics.

Real Capital Analytics reports that Europe’s share of the global cross-border market has shrunk back towards its long-term average, while both North America and Asia gained share.

Total transactions by China and Hong Kong investors slumped 80% year-on-year to less than €5bn, compared to around a 20% fall by US investors, who remain significantly the lead investor by country in Europe’s real estate market with almost €40bn.

China’s slowdown in European investment relates to the long-trailed government imposition of tightened capital controls on foreign property purchases. This reduction in liquidity has for the most part been supplemented by able buyers from other regions, including Germany, Singapore and South Korea, according to Real Capital Analytics data. Hong Kong is another increased investor over the last couple of years.

These second-tier Asian investors have started to diversify beyond the trophy assets in gateway markets by establishing local offices to facilitate further European expansion which is expected to continue in the years ahead.  For US investors, the UK is still most invested market in terms of deal volumes, according to Real Capital Analytics, although US investors sold around twice as much as they bought, making them net sellers for the third year in a row.

Tom Leahy, Senior Director, EMEA Analytics at Real Capital Analytics, explained:

“Germany is the main recipient of European capital, though UK players reined in their spending in the country to €3.5bn, down from a recent annual high of €5.8bn. In fact, UK investors spent more in France than they did in Germany in 2018. UK investment into Europe kicked up again at the end of the year, after a dip, with institutional players spending €15bn on the Continent as against €18bn at home in 2018.”

Overall, Europe remained high liquid over 2018, with annual investment volumes near to record levels and above €250bn for the fourth consecutive year. Last year was also characterised by a number of large platform transactions which bolstered the final annual haul, including €21bn Unibail-Westfield acquisition, Colonial completed its takeover of Axiare, and Vonovia’s €5.2bn takeover of Buwog in Austria.  

As the cycle continues, more large-scale platform deals are expected supporting transaction levels but disguising an overall thinning in market liquidity.

For inquiries related to Real Capital Analytics’ full report, entitled Europe Capital Trends, please contact Tom Leahy at tleahy@rcanalytics.com

 james.wallace@realassetmedia.com