Chinese: commercial thinkers

The Chinese will replace foreign investors as the main buyers of commercial real estate in the country over the next few years, according to a new report from international property consultants...

State firms, insurers, national and provincial pension funds, the country's sovereign wealth fund and the State Administration of Foreign Exchange will likely all increase their spending on real estate, says the research from Jones Lang Lasalle.

Between 2005 and 2007 foreign investors purchased almost 60% of prime real estate assets in China.

But more stringent approvals for inbound real estate investments since the middle of 2007 and the onset of the global credit crunch have contributed to a dramatic fall in foreign investment in Chinese property.

The domestic share of total property investment grew to 70% in the first half of 2009, up from 36% in 2008, the report shows.

‘We would expect the domestic companies to become more dominant, particularly in the investment market in China,' said K.K. Fung, the firm's managing director for greater China.

The deregulation of the insurance industry could potentially channel 236 billion yuan ($35 billion) into the real estate market, if China allows its insurers to put 15% of their investment portfolio into property sector, analysts point out.

This is likely as a new insurance law which comes into effect in October allows insurers to invest in the real estate market for the first time.

China Investment Corporation, the country's $300 billion sovereign wealth fund, has recently said it wants to increase its investment in real estate.

It has already put money into Morgan Stanley's new global property fund which will invest in China. ‘It is possible that CIC will make some sort of investment in Chinese real estate,' the report predicts.

The report is optimistic about the global commercial real estate market although it concludes that it will take another nine months for it to recover.

Overall in the global market transaction values have dropped 70 to 75% and prices are off 40 to 45% from the peak, said Colin Dyer, Jones Lang Lasalle's global chief executive officer and president.

‘There is an emerging recovery in transaction activity and in some pricing in the investment sales markets,' Dyer said, singling out London, Hong Kong, Seoul, Singapore and Paris.

Source: www.propertywire.com