Foreign property buyers ask for better services
By Jia Hepeng (China Business Weekly)
Updated: 2004-03-15 14:43

Although a rising number of foreign investors are buying Chinese property, their transactions have to be backed by better services.

"International small and medium investors are coming to the Chinese mainland," said Harry Lu, vice-chairman of 21st Century China Real Estate, a leading US-based property consultant.

Lu made his remark at a seminar held by China Daily and China Business Weekly last week. Ways to better cater for foreign buyers of Chinese properties was the focus of the seminar.

After seven years of hikes in North America, property prices in the United States and Canada have become prohibitively high, encouraging many local investors to turn to the booming real estate market in China.

During his recent visit to North America, Lu said many investors spoke to him about the possibility of buying property in China, especially through mutual funds and organizations involving smaller investors.

Although China's real estate market has kept double-digit growth for five years, prices of some luxury properties remain much lower compared with North America, and the investment potential is still huge, Lu said.

In 2003, a total of 1.01 trillion yuan (US$122.05 billion) was invested in China's real estate sector, rising 29.7 per cent over 2002. The production value of the real estate industry grew by 5.3 per cent and property price rose by 5.1 per cent nationwide.

So far, foreign investment in Chinese property remains low.

According to research conducted by Hong Kong-based property consultant DTZ Debenham Tie Leung, residents from Hong Kong, Macao and Taiwan had purchased a mere 0.36 per cent of units sold in Beijing by the end of 2002. Foreigners from other regions purchased 0.4 per cent of the total units.

DTZ's research showed overseas residents purchased about 6 per cent of Shanghai's residential property.

Major concerns arise for foreign residents with property when they want to leave China, as they cannot easily sell their property. However, the situation has been gradually changing.

Simon Cao, marketing sales department manager at Beijing Guohua Real Estate Co Ltd, said a growing number of foreign buyers are purchasing his company's luxury development.

China Central Place has been attracting fewer Beijing buyers compared to past project -- from 60 per cent to 20 per cent -- while overseas buyers are on the rise, at around 20 per cent. And the proportion of overseas property purchasers, mainly from Hong Kong, has kept on growing in recent months.

Liao Zhe, marketing department manager at Central Park, a luxury development in Beijing's central business district (CBD), has experienced the same phenomenon.

According to Liao, foreign purchasers account for 25 per cent of clients for its first phase of development and 40 per cent for its second phase.

Besides Hong Kong residents, there are an increasing number of Japanese buyers, many of whom will not rent apartments in Beijing.

Michael Lee, executive director of Regal Lloyds International Real Estate Consultants Co Ltd, said compared with major Chinese such as Beijing and Shanghai, several smaller but booming cities like Suzhou in Jiangsu Province, Dongguan in Guangdong Province and Qingdao in Shandong Province have greater potential for foreign property investment due to heavy foreign investment in manufacturing bases.

Since 1999, property prices in Suzhou have almost doubled -- yet the average price is still about half of Beijing and Shanghai's.

For smaller cities to attract international buyers, the image of the city is as important as the quality of concrete developments, and English media like China Daily and China Business Weekly can play a major role in the field, Lee said.

So far, most Chinese cities have abolished regulations allowing foreigners to buy only luxury properties and the prejudicial tax rate has been revoked as well.

However, it is more difficult for foreigners to buy property than their local counterparts due to the lengthy and involved transaction procedures compared to developed countries.

It is necessary for English media in China to offer more information concerning the procedures and policies and to present foreign investors' concerns to the government, Lee said.

Chinese-language property media has been expanding in recent years, but most potential foreign home buyers cannot rely on their Chinese information.

China's English media should try to grasp the chance to meet the demand of foreign property buyers, said Pan Minglang, sales director of HKI International, the backer of the luxury Beijing Financial Centre development. It is the landmark complex in the CBD.

On the other hand, English media should publish more property news and information, assisting foreign buyers to invest in China, Pan said.