Top Biz News

Overeas investors bullish on property

(Shanghai Daily)
Updated: 2006-06-07 15:12

Citigroup Inc's property unit plans to increase its investment in Chinese mainland's real estate market tenfold to US$800 million in the next three years, a senior company official said yesterday in Shanghai.

"We will buy all types of properties including office, retail and industrial properties in China." Stephen Coyle, chief investment strategist at Citigroup Property Investors, said in a real estate finance conference.

Citigroup last year spent more than US$50 million for a 75 percent stake in Novel Plaza, an office tower located in Shanghai's downtown area, as its first move in the mainland's estate market.

The company joins rivals such as Morgan Stanley and Goldman Sachs Group Inc in seeking investment opportunities in the nation's booming property industry, where demand for offices, shops and homes has been fueled by strong economic growth.

Some industry observers have attributed the housing price surge in big cities such as Shanghai and Beijing partly to the increasing inflow of overseas capital to the mainland's real estate industry.

Domestic newspapers were peppered with stories recently speculating that authorities will enact new policies targeting overseas capital.

"We expect tighter approval procedures for overseas investments in properties and restrictions on overseas financing for local investment vehicles used to acquire existing properties." Ma Jun, an economist with Deutsche Bank AG, said in a research note after China's government announced a string of regulatory measures on May 29.

The measures unveiled last week, including higher taxes down payments on housing transactions, didn't address the overseas investment sector.

Stanley Chan, managing director of Stanley & Partners Investment Management Co Ltd, however, said overseas investment in the mainland accounted only for 1.15 percent of the 1.8 trillion yuan (US$225 billion) in property sales last year and would hardly affect housing prices.

Gu Yunchang, vice president of China Real Estate Housing Research Association, said due to the absence of financing tools such as real estate investment trusts, individual domestic investors lose the opportunity to put their money in top-quality properties on the mainland. Overseas institutional investors now acquire these income-producing properties first and than inject them into REITs to be sold to overseas capital markets such as Hong Kong and Singapore.