GLOBAL – European and US real estate markets are expected to see an inflow of capital from Taiwanese insurers and Chinese institutions as regulatory restrictions are eased.
CBRE has estimated that $2.6bn (€2bn) of capital will be available to invest in international real estate markets when the Taiwanese government lifts restrictions on overseas investments for the country's insurers.
The figure is based on the assumption that only a handful of insurers will be able to make the move.
Under the new rules, only insurance companies with a risk-based capital ratio of 200% or more will be able to invest in overseas property, and they will be unable invest more than 10% shareholders' equity.
The new guidelines will also restrict the types of investments and the ways in which Taiwanese insurers can access the market.
CBRE said the government was likely to require insurers to invest in wholly owned buildings rather than enter into dual ownerships with co-investment partners.
This could prove an impediment to the US market, where co-investments are used for tax-saving purposes.
Insurers will also be restricted to investing in buildings with occupancy levels of more than 60%, and prevented from using leverage.
Furthermore, approval from the Insurance Bureau of Taiwan will have to be sought for each individual investment.
For investments in mainland China, applications will have to be directed to Taiwan's Ministry of Economic Affairs, and wholly owned foreign enterprises (WOFE) for onshore assets will have to be established.
Edward Farrelly, head of research for Taiwan at CBRE, said: "Despite the restrictions, the opening of an avenue for foreign investment is a positive move.
"Should these initial movements prove successful, then we may, of course, see the regulatory body move again to encourage further overseas investment.
"As such, we may view the current measures as part of a process rather than isolated intervention."
Chris Ludeman, president of global capital markets at CBRE, described the anticipated rule changes as having been "an open secret for some time".
He added: "Insurers in Taipei have expressed a keen interest in pursuing certain targets beyond national boundaries."
In addition to Shanghai, which benefits from a close proximity to Taiwan, the chief targets will be mature, liquid, global markets such as London, Frankfurt, New York and Toronto, according to Ludeman.
If Taiwanese insurers do move into international property markets, they will be following in the footsteps of their Chinese counterparts.
Ping An insurance company is reported to be close to acquiring the Lloyds headquarters in London for approximately £260m (€304m).
Speaking at the European IPD conference in Lisbon last week, Simon Mallinson, executive managing director at Real Capital Analytics (RCA), said this deal was "the first time you've seen non-state-backed Chinese money invested in the UK, or in Europe, in significant volume.
"That is reflective of the fact the Chinese are now allowing some of their corporate insurers and pension funds to invest outside [their borders].
"Taiwan is now allowing its funds to invest out of national markets, so a huge amount of corporate-style capital, not state-backed, is also on the horizon."
The latest figures from RCA show Chinese capital is flowing into European real estate following the recent recovery in the US property markets.
Transaction volumes for the first quarter of 2013 are already half that of the whole of 2012.
"We are seeing more and more capital now flow into Europe than into the US, which is a significant change in strategy over the last few years," Mallinson said.
