China Surpasses US As World’s Largest Real Estate Investment Market

There is no doubt that China’s real estate market is hot right now, and while worries mount that ordinary citizens are being priced out of the market, that …

There is no doubt that China’s real estate market is hot right now, and while worries mount that ordinary citizens are being priced out of the market, that apparently is not of concern to investors. In a recent investment report from Cushman & Wakefield, the US fell two spots to land in third behind the UK, leaving China as the top property investment market in the world. See the following article from Property Wire for more on this.

China overtook the US as the world’s biggest property investment market last year and will probably keep the lead in 2010 on economic growth and a lower reliance on debt, it is claimed in a new report. Real estate investment in China more than doubled to $156.2 billion last year, while the total for the US slumped 64% to $38.3 billion, the report from New York based broker Cushman & Wakefield says. Excluding residential investments, the US came third after China and the UK.

The report also shows that eight of the world’s 20 largest property markets last year were located in the Asia Pacific region, with Hong Kong, Taiwan and New Zealand registering gains in investment.

‘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.

China’s economy expanded at an annual rate of 10.7% in the final quarter of last year, boosted by Premier Wen Jiabao’s $586 billion stimulus package. While the US property market is being hurt by high levels of unpaid debt and a reluctance among banks to lend as they clean up their balance sheets, the Cushman & Wakefield report points out.

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China is taking steps to rein in the real estate market as price increases accelerate. The government in January re-imposed a 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’s supervisor of major financial institutions has warned against risks in the property market after recent rapid price rises and stressed the importance of controlling the pace of lending. Chinese banks lent nearly $1.5 trillion last year to support the government’s massive economic stimulus, fueling a surge in real estate and stock prices that triggered fears of asset bubbles in both markets.

‘There are definitely risks in the real estate market, as continuously rising property prices have made homes unaffordable to ordinary people, potentially causing social as well as economic problems,’ said Ding Zhongchi, chairman of China’’ Board of Supervisors for Key State-Owned Financial Institutions.

‘It’s important to control the pace of lending, while tightening banks’ capital adequacy requirements helps serve that purpose,’ he added.

Analysts at Cushman & Wakefield also expect that Japan will see a revival after investment fell 48% to $19 billion last year. Some distressed properties are selling for less than their construction costs and average rental incomes tend to be higher than financing costs, making the market ‘compelling’, they said.

In Europe, most investors are focusing on the largest, most active markets such as the UK, France and Germany. Investment in the continent will probably rise 44% this year to $152 billion, the firm predicts.

UK prices were among the quickest to bottom out after the global financial crisis began, with values falling 44% in the two years. The slide in prices and the pound’s weakness helped revive investment and lift property prices.

This article has been republished from Property Wire. You can also view this article
Property Wire, an international real estate news site.


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