Tighter capital controls imposed by Beijing are slashing China’s outbound property investment, affecting property prices from London to Hong Kong, Morgan Stanley said in a recent report. Outbound property investment by Chinese firms was already down 82% from a year ago, and is expected to plummet 84% to USD1.7 billion for the whole 2017, and down another 15% to USD1.4 billion next year. That trend will create headwinds for prices in Hong Kong, the U.S., Britain and Australia over the medium term. “Property developers are now struggling to transfer capital offshore and regulators are tightening offshore financing,” Morgan Stanley analysts wrote in the report. Late last year, policymakers spoke out against “irrational” overseas investment in sectors such as real estate, hotels, cinema, media and sports club businesses, which are perceived as a means of moving wealth offshore. These sectors are on Beijing’s so-called “negative list”, which are considered no-go areas for Chinese investors. Morgan Stanley said overseas property investment is the largest and fastest growing sector on the negative list, accounting for 6.3% of China’s outbound direct investment (ODI) in 2016, larger than the combined share of the remaining four sectors on the negative list. Real Capital Analytics, a .-.based private data provider tracking global property deals by both onshore and offshore China investors, observed that the number of pending deals has surged in the first-half. These are deals where a purchase agreement has been made but the buyer has not yet paid the money. Morgan Stanley said the slump would hit Hong Kong, the U.S., Britain and Australia. The office property sector is the most exposed, with Manhattan in New York City, central London and Hong Kong “markets of focus”, the report said.