Good Times Ahead for China

Property Peaks in Beijing

It looks like China is set to witness a property peak in the few months. According to experts in foreign real estate funds, this sector is due to “tighten” during this time frame. Grosvenor Asia Pacific manages $16b in assets and is setting out to raise “at least $270 million for a fund that will invest in Chinese properties as part of its expansion in Asia.” According to CEO of Savills Greater China, Raymond Lee, “a good opportunity will emerge for long-term investors in the coming six to 12 months, and what foreign real estate funds are doing now is finding a legal fund vehicle that can get their money into the country.” Indeed, substantial funding is expected to get to China before 2012 as well.

Increase in Investment

News from the Commerce Ministry is the increase in “utilized foreign investment” by 27 percent, reaching $17.8b by February 2011. Of this, $4.15b was in the real estate sector. In an effort to curb this, local authorities were ordered to “halt the approval of some foreign property investments to stop speculative purchases, it said in a Nov 22 statement.” Local authorities will have to “strengthen their reviews of foreign exchange inflows for real estate transactions and documentation for land rights.” Right now there are two principal channels for foreign capital that “flow into the Chinese mainland’s property market”: participating in development with local partners and cooperating with Hong Kong-listed real estate companies.

Real Estate Firms Future

According to President of CB Richard Ellis China, small- and medium-sized real estate firms are likely to feel an additional squeeze by June that will result in more “equity investment opportunities for foreign institutional investors.” This is due to banks making it harder to borrow money and dropping property sales. Prices of residential projects will be “more competitive.” As well, for those medium- and high-end homes which witnessed “excess short-term price growth,” are being impacted by government real estate “tightening” policies. The advice by experts thus is to avoid these sectors to protect your investment. Ultimately, even though foreign investors have expressed concern about the potential risks in China, a “clear long-term picture through the 12th Five-Year Plan” is still what’s keeping confidence high and bringing investors back to China all the time.

Comments are closed.