Foreign real estate firms exiting capital

BEIJING - An increasing number of foreign real estate companies left Beijing last year, an occurrence that industry analysts said will not have large consequences for China's property market.

The Beijing Administration for Industry and Commerce said 217 foreign property enterprises exited the city in 2011. And only 129 foreign real estate companies were established in 2011, down 55.82 percent from 2010.

Foreign firms' numbers increased in the real estate business much more slowly than in other industries. More than 2,900 foreign companies were established in 2011, down 7.12 percent from the year before, the bureau said.

"The presence of few tradable assets in Beijing, tightened credit policies and greater obstacles to bringing in money are the main reasons why foreign capital is leaving the city's real estate market," said Carlby Xie, head of research at the real estate consultancy Colliers International (Beijing).

The Chinese government adopted a slew of measures last year to cool down the sizzling property market, narrowing the supply of loans to property developers and individual buyers, restricting the number of homes a family can buy and insisting that higher downpayments be made on home purchases.

"But just because foreign real estate companies are leaving Beijing, that doesn't mean they are leaving the country," Xie said. "And since foreign investors had a small share of the market, their leaving is not likely to have great consequences."

In Beijing, about 10 en bloc sales transactions were concluded and disclosed in 2011. Foreign firms had little part in them, and domestic investors - State-owned enterprises, financial institutions and private developers - continued to dominate the market, according to a recent report by Colliers International.

Frank Marriott, senior director of Savills' Real Estate Capital (Asia Pacific), had similar thoughts.

"Though the office markets in Beijing and Shanghai are still the favorites for international institutional investors, especially core real estate funds that prefer relatively lower risks, there are few investment opportunities for international funds in these two office markets as the supply is limited and the competition is fierce," Marriott said.

According to Marriott, international funds are looking at investing in residential property and at opportunities in second-tier cities.

"Some international funds did sell their projects in China, but the major reason for that was that their investment period had come due, rather than any pessimism about the country's real estate sector," said Chris Brooke, CEO of CB Richard Ellis Asia, part of the CB Richard Ellis Group Inc.

"International investors still have a strong interest in the Chinese property market," Brooke added.

China Daily

(China Daily 02/17/2012 page14)