Chinese real-estate investment to see growth

According to Colliers' latest Asia-Pacific Real Estate Investment Bulletin, the moves aimed to relax regulations governing foreign investment in China and boost housing consumption by existing property owners and foreigners.

Domestic institutional investors have continued to be active in both the residential and office sectors of the sales market. However, the bulletin said the investor profile will soon be more diversified because under recently revised insurance laws, Chinese insurance corporations became eligible to invest in the real-estate market.

It is estimated that approximately 100 billion yuan (Bt503 billion) in domestic funds will be injected into the property sector as a consequence.

In addition, changes in corporate real-estate strategy among Chinese and overseas retailers have become more apparent in that they have begun to purchase rather than leasing properties.

The bulletin says the real-estate market in western China, including Chengdu, continued to feel the impact of the global financial crisis in the first quarter of this year. Key international enterprises sought fewer workers and the bulk of them seemed determined to downsize their floor-area requirements in anticipation of business contraction over the near to medium term.

The office sector saw a negative take-up for the first time in the past 10 years due to the dramatic retreat of investment by foreign companies. In addition, existing investors and developers either deferred or shelved real-estate development plans in Chengdu.

However, a series of government measures was implemented to support the residential property market after a major price correction in the second half of last year and the number of residential sales transactions posted a rise in this year's first quarter.

Despite the recent retreat of investment demand, the majority of investors remain confident about the real-estate market in Chengdu over the medium to long term.

According to the Chengdu Industry and Commerce Bureau, the financial crisis has had a relatively small impact on the city. Due to the fact that Sichuan and Chengdu are key targets in western China and local governments are giving preferential treatment to real-estate investment, the property market as a whole is expected to enjoy healthy growth over the medium term, the bulletin says.

Investment focus is expected to turn to the grade-A office sector and the housing market this year.

In the office sector, rentals remain under downward pressure because of growing supply over the next few years. At the same time, demand fundamentals on the leasing front are not looking strong because many companies have deferred expansion plans and devised new measures to cut back on costs, including real-estate rentals.

In general, the office sector investment market is expected to remain quiet until the bulk of new supply is launched by 2011.

The bulletin says that in China's retail market, performance has been relatively resilient despite the economic downturn because of the limited supply of shopping malls.

Overall, retail rentals at individual shopping malls have fallen off by 10 per cent since the onset of the financial tsunami last year. With sustained leasing demand attributed to a group of foreign fashion labels that are looking to open new outlets in the core districts, retail rentals will remain stable and sales transactions involving prime retail shops are expected to remain active.