China overtakes US in commercial real estate

HONG KONG: China replaced the United States as the world's largest commercial real estate investment market last year and is likely to retain that position as global money flows improve as the country's economy grows, according to a report by property consultancy Cushman & Wakefield.

But some analysts warned that proposed regulatory changes concerning offshore transactions may limit foreign investment on the mainland, which is now dominated by local players.

In its newly released summary report on global investment market trends, Cushman & Wakefield said real estate investment in China grew 143 per cent to US$156.2 billion last year, while falling in the US by 64 per cent to US$38.3 billion. Excluding residential investments, the US ranked third after China and the UK.

The US, which topped the rankings in 2008, saw its property market hurt by high levels of unpaid debt and reluctance among banks to lend as they cleaned up their balance sheets, Cushman & Wakefield said.

"We strongly believe that 2010 will be the year of unprecedented real estate investment activity in China," said Richard Middleton, executive managing director of Cushman & Wakefield's Greater China operations. However, there was concern that proposed regulatory changes on the mainland regarding offshore transactions might limit foreign investment, Jones Lang LaSalle said in its latest research report, although it did not make specific reference to any.

China is also taking measures to cool off skyrocketing home prices, including a re-imposed sales tax on homes sold within five years of their purchase, and the People's Bank of China raised the proportion of deposits banks must set aside as reserves, to reduce lending.

"China will continue to see vibrant investment activity despite recent government measures to cool down the property markets," Donald Han, Cushman & Wakefield's managing director for Asia-Pacific capital markets, said in the report.

China's real gross domestic product growth accelerated to 10.7 per cent year on year in the fourth quarter last year, and the full-year growth of 8.7 per cent exceeded the government's 8 per cent target. Cushman & Wakefied said eight of the world's 20 largest property investment markets last year were located in the Asia-Pacific region, with Hong Kong, Taiwan and New Zealand registering gains in investment.

Looking ahead, Jones Lang LaSalle anticipates a 30 to 40 per cent increase in direct commercial real estate investment volumes globally this year as the economic recovery continues.

The US real estate investment market, as it is coming from a low base, may be poised to see the fastest rate of growth, a projected 50 to 60 per cent. Expected volume growth in the Asia-Pacific is 30 to 50 per cent, and in Europe, 20 to 30 per cent. - South China Morning Post

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