214: Property Investment in China
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Property Investment News -
AS high-return, buy-to-let opportunities dry up in Britain and Europe, City of London investors are turning to the east. Britons are snapping up apartments in Chinese cities, taking advantage of the undervalued Renminbi, surging property prices and a burgeoning middle class. They need to move fast; they must also consider the risks, especially the political pitfalls.
Faced with soaring property prices in cities, the Chinese government has already written new rules to cool the housing market. The regulations were applied to Beijing in July, but the door is still open to foreign property investors in Shanghai. According to the new regulations, foreigners need to be living and working in China for at least a year before they can buy a home directly, which must be for their own use. The restriction does not apply to Chinese living overseas or to residents of Hong Kong and Macau. The policy amounts to “one purchaser, one property”.
Furthermore, foreign real-estate developers looking to invest more than $10m in Chinese investment property are required to have registered capital of at least 50% of their investment. For lower-value investment property schemes, developers with capital of less than 35% of the project value will no longer qualify for loans from Chinese banks. According to property investment estate agent Jones Lang LaSalle in China, any breach of the regulations will annul pre-sale and property rights transfer registration.
House prices in some Chinese cities, including Beijing and Shanghai, have risen by up to 25% a year for three years, putting home ownership beyond the reach of some locals. Michael Hart, head of research at Jones Lang LaSalle, says the government is hoping to “calm nationalist sentiments blaming foreigners for price rises and dissuade short-term speculation on any currency appreciation”.
It is still possible to buy in Shanghai, where City investors have been rushing to buy. Foreigners may be allowed to purchase more than one residential investment property there, if the city government decides not to implement the rule changes.
Dominic Keogh, managing director of the London-based property company Shanghai Vision, says Shanghai has stated that it is “satisfied that foreign ownership is not preventing residents wishing to purchase property, as salaries are rising on average 12-15% per year”.
Keogh adds: “Unlike Beijing, overseas property investors can still buy off-plan homes in Shanghai and register them simply by using their passport number.”
There is another route, according to Keogh. Wholly Owned Foreign Enterprises (WOFE) registered in China can buy developments, regardless of the origin of the shareholders. Purchasing through a company is as commonplace as it is in Thailand and the Czech Republic.
Keogh says: “Over the next three years, up to 63% of the new office space in Shanghai will be located in Pudong. This includes Shanghai’s World Financial Centre, twice the size of Canary Wharf. International corporations such as Citibank, General Motors and Philips are relocating their Asia-Pacific headquarters from Hong Kong to Shanghai.”
The enormous influx of business into Pudong is generating interest in developments such as Times Square, as British property investors recognise that many financial workers like to live close to the office. The rate of sale has been remarkable. Earlier this year, Shanghai Vision sold the first 40 apartments in Times Square for £70,000-£115,000 each in three days (one buyer bought six). In five weeks it sold 160 units. A third of the buyers are personal investments by London-based bankers.
Overall, the Chinese property market has been attracting vast investment this year. Foreign capital investment increased almost 28% in the first half of 2006. Keogh says: “While the property growth is impressive, many City investors have an eye for currency opportunities. According to Citigroup forecasts, the currency is still undervalued by around 25% – buying investment property is the best way to capitalise upon this.”
Source:
The Business - Top Stories