Foreign funds into property to rise
www.chinaview.cn 2005-05-25 09:49:59
BEIJING, May 25 -- The flow of money from U.S. and European funds into property on the mainland would increase, a senior real estate industry executive said.
Foreign investors such as Goldman Sachs recently dipped their toes into real estate in China as the country's surging economy fuels a nationwide building spree.
But Western investment funds have largely remained on the sidelines of mainland's property market, even as some Asian investors have jumped in.
“Until the renminbi is fully convertible,” foreign investment funds “won’t come en masse,” Randall Hall, China chief executive for London-listed property services group Savills said.
In anticipation of the potential demand, Savills is getting into the business of managing the finances of property owners in China. The firm expected to soon announce its first asset management contract in China, Hall said, declining to identify the client.
Property asset managers essentially act as landlords. The outsourcing of such delicate tasks as negotiating and collecting rent marks a step forward in the development of the mainland’s property sector.
Earlier this year, Goldman Sachs made its first big investment in Chinese property, buying a 24-story Shanghai office tower. In 2003, a joint venture between Australia’s Macquarie Bank Ltd. and investment fund Schroder Asian Properties, became the first non-Asian buyer to secure a site for development in Shanghai.
But barriers remain to large inflows of investment from foreign funds into the mainland’s real estate market.
Foreign banks in China can currently only offer mortgages to foreigners, limiting financing options for domestic consumers, Hall said.
China is set to fully open its banking sector to foreign competition at the end of 2006 in line with its commitments to the World Trade Organization.
Greater competition in China’s banking sector would spur demand for property, Hall said. “This will be an enormous shift in options for consumers,” he said.
For now, some Chinese officials and foreign analysts worry soaring prices in major cities, particularly the commercial capital of Shanghai, represent an investment bubble in the making.
According to official numbers, average home sales prices in Shanghai surged 26 percent last year, to US$784 a square meter. The jump in prices in recent years — averaging a total 90 percent since 2000 — is making prices unaffordable for many residents.
Shanghai authorities in March put into effect a 5.5 percent capital-gains tax on apartments sold more than once in a year, in an attempt to cool property speculation.
While Hall acknowledged that housing “is becoming unaffordable for much of the market,” he said the market for premium property remained healthy. He noted that high-end real estate was far less expensive in Shanghai than in Hong Kong.
(Source: Shenzhen Daily/Agencis)
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