China’s Real Estate Market Continues to Grow Despite Cooling Measures

The real estate market of mainland China is continuing to attract attention from overseas investors, as the measures taken to contain its rapid price growth result in an increasingly healthy market.

During 2006, the government imposed a number of measures intended to calm the market, from introducing higher interest rates on loans along with minimum down payments for purchasers, to limiting overseas property purchases. The property market has remained healthy and lucrative, however, due to a combination of rising numbers of high earners, economic growth and accelerated urbanisation. Changes in the market are continuing to attract foreign investors, including reform to market regulation and the land auction system, as well as the expected revaluation of the Yuan.

If anything, overseas investors were happy with the moves to restrict an overheating of the market, and are continuing to purchase properties en bloc, and joining forces with partners – foreign or domestic – for new projects.

Shanghai has been the destination for a large chunk of the foreign investment into China. A short time after last year’s measures were introduced, Morgan Stanley confirmed their purchase of the 32 storey Chateau Pinnacle Tower A for 760 million Yuan (around 98 million US Dollars). Gateway Capital has bought a three storey apartment block in the city with 100 units, for around 77 million US Dollars.

Shanghai and Beijing attract the greatest amounts of en bloc investment, with 73% of transactions in 2005 and 2006 going into these cities. This is largely due to the high quality, completed developments available in these two established cities.

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