Chinese real estate magnates have started to look toward international markets for investment options
The Chinese government’s attempts to calm down what it perceives to be inflated property prices has resulted in a number of Chinese developers moving to the international market.
The government seems serious about preventing a similar real estate bubble to that which caused the financial crises in the United States and Europe. State newspapers report that real estate firms are no longer allowed to sell new shares until they can convince authorities that they are not manipulating property prices.
Selling bonds and loans to foreign investors is still permitted or rather it is more difficult for the authorities to control. A large number of developers say that what they call ‘draconian’ measures will lead to a collapse of house prices in the near future.
Chairman, Feng Lun, of Vantone, a real estate company based in Beijing, recently said during a panel discussion taking place in New York that Chinese developers were increasingly forced to invest in overseas projects, because of an ‘unfriendly’ business environment in their own country. He also lamented the numerous policy restrictions making it hard for Chinese citizens to purchase real estate.
The discussion was attended by US financiers such as Deryck Maughan, a partner at buyout firm Kohlberg Kravis Roberts & Co and the CEO of Rockefeller and Co, Rueben Jeffery III.
Feng listed a number of obstacles faced by Chinese property developers, including high interest rates on loans, high requirements for equity and uncertain economic and social prospects. His company is currently leasing the top floors of 7 World Trade Center, where they have established what they refer to as the China Centre, which provides office space for Chinese businesses relocating to or expanding in New York.
Feng has also invested in several residential housing projects in Taiwan. According to him, his clients are wealthy Chinese who have emigrated because they want better education for their children, better asset protection, a cleaner environment and more political stability.
In September, Huang Nubo, a billionaire investor from China, announced plans to purchase 155 square miles of land in Iceland’s remote northeast. He intends to invest a further $200m to develop a luxury hotel, golf course, airport and horse-riding facilities. He said in an interview recently that the move forms part of his company’s strategy to expand globally. Whether this has anything to do with the investment climate in China is not clear at the moment.
The Chinese government has taken various steps to cool the real estate market during the past two years in an attempt to ensure affordable housing for its citizens. Government departments have made it more difficult for ordinary people to qualify for home loans and if the individual already owns one or more properties it has become virtually impossible for them to qualify for a loan. Until quite recently this has not had a significant effect on house prices. A recent survey, however, showed that prices dropped by 0.23 percent during October, compared to September, following a drop of 0.03 percent between August and September.