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The signs may be growing that Chinese money is heading for real estate in Europe, but there is no evidence of a looming avalanche or a wall of capital crashing over the sector, according to Alfred Fink, a partner at law firm Taylor Wessing.

'There's a lot of interest, but they haven't all set up operations and got settled yet. The Chinese are looking, but actual investment is not yet materialising.’

Fink made the comments at PropertyEU's 2014 Outlook Investment Briefing at Taylor Wessing's office in Paris on Tuesday. During the panel discussion, Raphael Treguier, CEO CeGeReal, pointed out that the true motives of Chinese investors in Europe often remained quite vague. 'The key question is why do they want to invest in Europe? I was in Singapore recently and spoke to a group of Chinese investors, but I didn't receive any clear answers,' he said.

Potential bubble
According to Fink, many Chinese are concerned about a potential bubble in their own real estate sector at home and are looking for stability outside their home market, even if that means lower growth. 'They will pick opportunities for stability. But France is not one of the countries they pick first. From an Asian perspective, France is a very small country. They first want to find stability and proven stability before they invest. They have a lot of money, not just a couple of billion euros that they plan to spend over two to three years. They have a time scale of 15 years, which is so different to what we are used to. We have to be patient and have a clear idea of what the investment proposal is.'

While Chinese investors remain concerned about the tax situation in France, the country remains a core market, Lamé pointed out. 'A diversified pan-European portfolio definitely needs Paris, but they would target central locations and defensive assets first. International capital is most interested in what is healthy and robust. Germany as a country is the most healthy in Europe, but on the other hand the Chinese don’t want to overpay. They’re looking for the best asset for the price they are willing to pay.'

Generational thinking
Chinese investors think not in five-year terms, but in generations, added Fink. ‘They are investing for the next 10-15 or even 20 years. They don't have the same mindset as institutional investors who are used to thinking in cycles. Yield is less important if you take into account that the Chinese currency will most likely adjust during a longer period.’

According to Martin Vest, managing director Western Europe, Aareal Bank, the wave of Chinese money currently heading for real estate in Europe is also looking to obtain finance and leverage. After a first wave of Chinese capital in the US, Europe is now seeing a second wave, he added. 'The Chinese want to protect their capital. But they don’t want to overpay.'

Some Asian money has already arrived in France but investors are still in a learning process, noted Diane Becker, head of international investment at Catella. Korean pension fund NPS is a case in point. 'Asian investors are not familiar with the law system and the real estate market which is quite in-transparent, at least on the continent. When they have an opportunity to buy property, they buy core but not prime property.'