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)