Foreign investment in China's real estate sector plummeted the past six months as growing competition from local investors and the worsening of the global economy has become more difficult to raise funds.
Jim Yip Kin-shing, one of the managers of investment to China DTZ, said the real estate private equity funds have struggled to global investors invest in new funds for acquisitions in China.
According to the latest research report of the company, foreign investment in the Chinese real estate market, which is dominated by commercial properties, totaling 2.800 billion yuan (U.S. $ 440 million) in the first six months. This represents only 22% of the value of total investment 12.100 billion yuan.
Foreign investment in the sector during the past year amounted to 17.100 billion yuan, representing 43.8% of total 39.000 billion yuan.
"The investment market in general in Shanghai has been weak compared to 2011," said Yip, who now expects the total investment reaches 20,000 million yuan this year. According to the expert, the situation you're seeing in Shanghai could be a reflection of market trends nationwide.
CBRE's research shows that the total foreign purchases in China fell nearly 40% in the first half of this year compared with the second half of 2011, which could be indicative of market sentiment in the country.
"However, foreign investors hold a strong appetite for well-located, high-quality commercial assets," said Greg Penn, executive director of CBRE Investment Properties Asia.
Local financial institutions dominate the acquisitions of properties in China.
Recent notable examples include buying Longyu International Commercial Plaza by the bank Baoshang by 1.950 billion yuan and an office building in the north of Shanghai China Jianyin Investment concretized by 2.310 billion yuan in rivera.
"Local buyers are not focusing on yields when making purchases, which is making it difficult for foreigners to compete in certain businesses," Penn said.
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