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BIZCHINA / Overseas Investment

No let-up in foreign money in real estate

By Hu Yuanyuan (China Daily)
Updated: 2007-08-17 07:15

Over a year has passed since six ministers jointly released Circular 171
last July to rein in foreign investment in China's sizzling property
sector.

The circular, to some extent, has slowed the entry of speculative foreign
capital, but has had almost no impact on long-term investors.

The National Bureau of Statistics said on June 19 that foreign companies
poured 22.2 billion yuan (US$2.92 billion) into China's property market
from January to May this year, a rise of 89.9 percent year-on-year.

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On the same day, Aetos Capital, a US hedge fund, inked a deal with the
country's largest insurer, China Life, on a $1 billion investment in
China's property sector.

Also on June 19, Glitnir Bankhf, a financial institution from Iceland,
announced cooperation with CGC Overseas Construction Co to co-develop a
residential block in Shenyang, the capital of Northeast China's Liaoning
Province.

"In the short run, macro policies increase business uncertainties. But in
the long run, China's property market will be more attractive for foreign
investors after the bubble is burst, especially with the renminbi
continuing to appreciate," said Eric Chan, deputy managing director of
Savills Property Services (Beijing) Company.

The high return, experts say, is the driving force behind foreign funds'
strong interest in China's real estate sector.

According to a report by CB Richard Ellis, an international real estate
services firm, the investment returns on office buildings in Beijing and
Shanghai hit 8 percent in 2006, the highest in the world.

RREEF, a real estate arm of Deutsche Bank, said in a recent report that
the gross profit margin of China's residential buildings could be as high
as 20 to 30 percent, which could beat that of the US in the future.

"Expecting continued appreciation of the renminbi, foreign capital is
flowing into second-tier cities such as Tianjin, Hangzhou, Chengdu,
Shenyang and Chongqing," the central bank said in a report on July 31.

Some industry insiders put the amount of foreign capital swirling in
China's second-tier cities at over 100 billion yuan.

(For more biz stories, please visit Industry Updates)

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