China's mainland real estate market remained in the global
investment spotlight last year, according to the latest market
review released by international property adviser DTZ.
The annual review of property markets in the Asia Pacific
region, covering sectors including residential, office, hotel,
retail and investment, said real estate investment with a unit
value of US$10 million or more rose 22 percent to 322 cases in the
mainland last year, with total value rising 33 percent to
HK$157.747 billion?(US$20.2 billion).
"In addition to the growing number of transactions, the money
poured into each investment project also gets bigger, increasing by
nine percent from an average of million HK dollars?in 2005 to
490 million HK dollars?in 2006. This reflects a higher level
of investment activity in the country's real estate market," said
Alva To, director of consulting and research with DTZ.
Of the 322 investment deals on the mainland, 273, or 85 percent,
were land purchases for real estate development. The remaining 49
deals involved the acquisition of entire buildings.
Compared with 2005, the number of land transactions increased by
19 percent, while that of entire buildings witnessed a more
remarkable growth of 44 percent, a sign that the latter is getting
a larger share of the investment pie.
The total investment value of en-bloc building purchases last
year was HK$33.021 billion.
While domestic funds are major land buyers, accounting for 80
percent of site transactions, foreign funds preferred buying whole
buildings, executing 82 percent of those deals. Foreign investment
in en-bloc buildings rose 38 percent from 2005, with total value
surging 67 percent to 29.5 billion HK dollars.
Foreign funds include all money contributed by overseas-listed
(including Hong Kong) investors and developers, said DTZ.
"With both transaction numbers and the investment amount surging
in tandem, we can no doubt conclude that investment funds are
keener to invest in this rapidly-expanding economy - especially in
search of ready-built properties that warrant attractive returns -
partly riding on housing-price hikes and the potential appreciation
of the Chinese currency," said To.
DTZ added that rapid economic growth and acceleration in
urbanization, combined with an increasing influx of multinational
corporations, bodes well for the development of the real estate
market.
Shanghai and Beijing remain the priorities for en-bloc building
investment, accounting for 73 percent of the total number of
transactions last year.
In particular, as China's mainland financial hub, Shanghai
attracted the most attention from investors. City transactions rose
from 16 in 2005 to 26 in 2006, and its share of overall investment
increased from 47.1 percent to 53.1 percent.
However, investment interest in major cities elsewhere also
heightened, with the number of transactions conducted outside of
Beijing and Shanghai increasing from nine to 13, according to the
DTZ report.
Shenzhen and Guangzhou, two key cities in the country's southern
Pearl River Delta region, both attracted growing investment
interest. In 2005 each of these cities only registered one
investment transaction, while in 2006 Shenzhen saw four and
Guangzhou five, with their combined share of overall investment
tripling from six percent in 2005 to 19 percent last year.
Spectacular price rises in major cities boosted by strong
investment demand have prompted foreign funds to look for potential
opportunities in southern China. The Pearl River Delta is enjoying
rapid growth in exports and logistics development, the market
review said.????
While most investment money was spent on completed office and
retail projects in 2005, the combined share fell from 68 percent to
49 percent last year in terms of total number of transactions.
Meanwhile, serviced apartments, residential blocks and hotels
emerged as favored alternatives. Their share of total investment
almost doubled from 20.6 percent in 2005 to 40.9 percent in
2006.
"We are seeing a much more balanced performance across various
property sectors in 2006. Despite the fact that office and retail
retain their dominance, we believe demand for investment
opportunities in residential, serviced apartment and hotel sectors
will increase," To said.
This is due to faster urbanization, growing affluence and an
increasing inflow of expatriates into China's mainland, allowing
these sectors to play a more significant role in the property
investment market.
As for building sites, both mainland and overseas funds are
showing increasing interest in land, with the number of site
transactions involving mainland funds rising 15 percent to 218, and
that of foreign funds jumping more significantly by 37.5 percent to
55.
Despite austerity measures to control investment in real estate,
financially sound overseas investors are still keen to invest, said
DTZ.
Sites allocated for residential development are the most
popular, accounting for 37.7 percent of total number of
transactions, increasing from 47 in 2005 to 103 in 2006.
(Shanghai Daily February 13, 2007)