China's prospering property market will remain attractive to overseas investors in the medium to long term, despite the tightening of government controls over foreign capital, say two leading foreign property services companies operating in China.

 

Jones Lang LaSalle (JLL), the only real estate money management and services firm named in Forbes magazine's platinum 400, said in a statement that real estate in China remains of interest to the medium and long-term investors.

 

"Based on economic indicators, China's pace of growth remains one of the fastest in the world and thus, remains attractive to investors," says the statement on its website.

 

Nicholas Co, director of investment department with international property advisers Debenham Tie Leung (DTZ), said the continued rapid expansion of the Chinese economy compared with the rest of the world had been a major factor behind the growth of overseas investment in the real estate sector.

 

The government Monday issued the long-expected new policy on overseas investment in the property market, in a bid to curb what it described as the too rapid inflow of overseas capital, an absence of proper market entrance standards and chaos in the market order.

 

The new policy requires overseas investors to have a commercial presence in China and seek the approval of Chinese authorities before entering the property market, and that their business activities must observe rules in capitalization, foreign exchange controls and other fields.

 

The new policy also restricts overseas businesses and individuals to only buying properties for self-use after a presence of at least one year in the country.

 

Both JLL and DTZ denied that overseas investors in China's property market were purely speculative, a charge that has drawn criticism from the public.

 

"Based on current models, most of the foreign capital investor stake medium to long-term views on the Chinese market with no intention for pure speculation," the JLL statement reads.

 

DTZ's Co said most of their clients had a positive view on the future of the Chinese economy, and they tended to keep their Chinese property for long-term returns.

 

A short-term review of strategies by investors, however, seems inevitable.

 

JLL said foreign investors "will require a re-assessment of their strategy" and that "some planned investments in China may be re-evaluated or re-directed to other countries".

 

Co said the new policy might slow the flow of overseas capital into the Chinese market, as existing investors would be more cautious in their moves, while potential investors might choose to stay away for the moment.

 

He predicted that more overseas investors may choose to team up with Chinese property developers.

 

(Xinhua News Agency July 26, 2006)