No let-up in foreign money in real estate
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.
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.
