New rules for China’s real estate sector benefit investment in medium-sized cities in Pearl River Delta

14 October 2010

Zhuhai, China, 14 Oct – Measures to control the real estate market adopted by the Chinese government last April are leading to investments in the sector being channeled into the medium-sized cities on the Pearl River Delta, according to the Chinese press.

Foreign institutional investors and Chinese real estate companies are boosting investment in the medium-sized cities on the Pearl River Delta to benefit from lower prices and the rapid urbanisation processes, the China Daily reported.

Other Chinese media, such as the People’s Daily, the official newspaper of the Chinese Communist Party, financial magazine Caijing and website China Real Estate News reported that investors are taking advantage of the new legislation to transfer investments from the biggest cities (such as Beijing, Shanghai and Guangzhou) to medium-sized cities in an effort to reduce risk.

“We are particularly interested in medium-sized cities (…) on the Pearl River Delta,” said James Pan, chief executive of investment house Everbright Ashmore (Beijing) Real Estate, cited by the China Daily.

Everbright Ashmore (Beijing), a subsidiary for real estate investment of the China Everbright group, of Hong Kong, which already has investments in cities such as Chengdu and Chongqing (southwest China), is focusing on the potential of retail and residential real estate projects in the Pearl River Delta.

According to financial magazine Caijing and website China Real Estate News, the effects of April’s legislation have yet to be felt in the Pearl River Delta. In order to combat speculation, the government increased the lower limit on deposits to buy second homes from 40 percent to 50 percent.

As well as this, banks are now required, amongst other measures, to take into account regional and market disparities to set interest rates for home loans which, according to Caijing, has benefited cities such as Dongguan, Foshan, Zhuhai and Zhongshan and not only in the real estate sector.

In Foshan, for example the magazine reported, apartments are only sold after the buyer has proved they have paid all their taxes and social security contributions in the city, which has attracted new companies to register in the municipality.

Analysts have said that the new policies for the sector make the process of integration of the Pearl River Delta easier. Zhang Yan, a project manager at real estate agency Zhongshan World Union, cited by China Real Estate News said that with the prices of houses in Guangzhou (capital of Guangdong province) still high but expected to lose value in the future, buyers can choose other cities in the region, even if they work in Guangzhou.

“Investors will have products for buyers in Zhongshan who live or work in Guangzhou or Shenzhen, because the distance between these cities is not very big. As well as acquisition being easier, customers also take into account the convenience of investment for the daily lives,” said Zhang Yan.

Since China introduced the new measures to cool the real estate sector, prices of houses in Guangzhou have fallen by an average of 2,526 yuan (US$377.9) per square metre. (macauhub)