The soaring real estate bubble in China hasn't burst but it has driven many foreign institutional investors to consider other markets, according to recent studies by Jones Lang LaSalle.
"We've investigated a number of projects since the last quarter of 2010," David Edwards, regional director at LaSalle Investment Management, told The China Post.
"Though reducing market liquidity has made the price of assets more attractive, the tightening regulations have made investment much more difficult," Edwards said.
Jones Lang LaSalle manages $45 billion in world-wide real estate investments.
As the amount of foreign investment flowing into China's real estate sector soared last year, the Ministry of Commerce ordered local authorities to halt approval of some foreign property investments to stop speculative purchases, The Post reported.
(Real Estate Channel reported that move in November 2010. Please see related postings at the end of this posting.)
Local authorities are also required to strengthen their reviews of foreign exchange inflows for real estate transactions and documentation for land rights.
Statistics from the Ministry of Commerce show that foreign investment in the nation's property sector rose 48 percent to $20.1 billion in the first 11 months of 2010, close to three times the 17.7 percent increase in the country's total overseas capital inflows.
China's Ministry of Commerce and the State Administration of Foreign Exchange now is regularly assessing the entry of foreign capital into the property market.
Edwards told The Post there is still $1 billion outstanding from its $8 billion Pan-Asia real estate fund that was designed to be invested in Asia.
"We hope to see two to three deals to be signed in China within a couple of months. If tightened regulations forbid us to achieve these deals, we'll have to go to other markets in the region," he said.
In January, China launched its latest slew of policies designed to restrain property price growth, including raising the minimum down payment for second-home buyers to 60 percent from 50 percent, imposing home-purchase restrictions in more cities and introducing property tax in Shanghai and Chongqing.
Edwards said he expects domestic transaction volumes and prices will pick up this year, particularly in the industrial sector.
Commercial asset pricing is expected to firm up rapidly with new capital from domestic insurance companies seeking quality office and retail assets.
For Kenneth Tsang, head of Asia-Pacific Strategy at LaSalle Investment Management, the best investment opportunity is selective residential developments in the nation's second-tier cities, focusing on high quality projects and developers with proven track records.
"Domestic core investors in China should consider selective quality office and retail assets in first- and advanced second-tier cities, as long-term demand is strong while liquidity is surging," Tsang told The Post.
Despite China's rigorous real estate policies, a number of international real estate funds are raising money, with an eye on China's property market, Tsang said.
For example, the United Kingdom-based Grosvenor, which manages $16 billion in assets, aims to raise at least $270 million for a fund that will invest in Chinese properties as part of its expansion in Asia.
by Alex Finkelstein World Property Channel March 3, 2011
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