CBRE Global Investors, manager of $94.8 billion of real-estate assets, said the next one to two years will be a good time to invest in China’s property market as it slows on the government’s tightening policies.
The fund is “on track” to make its first residential investment in China in five years by acquiring shares in a joint-venture project in the second quarter, Greater China Country Manager Richard van den Berg said in a phone interview. It is also seeking to develop retail space in mixed-use development projects with a strong residential base because they are “especially attractive,” while prices of completed retail and office projects are “quite steep,” he added.
“We like to buy in the bottom quarter of the market, preferably before the up-tick really gets going,” van den Berg said from Hong Kong. “We think we are in the bottom quarter part of the market now.”
China’s home prices fell for the seventh month in March by 0.3 percent from February, according to SouFun Holdings Ltd., the nation’s biggest real-estate website owner. Premier Wen Jiabao said in an economic meeting on April 2 that the government will “resolutely” maintain its curbs on the country’s property market.
CBRE doesn’t expect the government to alter its property policies before changing its leadership later this year, van den Berg said. Even after that, it might take a couple of months before some gradual easing takes place, he said.
China’s two-year campaign to rein in home prices has included measures such as higher down-payment requirements and mortgage rates, and home purchase restrictions in 40 cities.
CBRE is “actively” looking for deals in China’s smaller second- and third-tier cities, especially the satellite towns of Shanghai and Guangzhou. Such cities, including Nantong in the eastern Jiangsu province, are “very good investment opportunities,” because they often have “quite high” per capita income and good infrastructure linked in with high-speed rail to first-tier cities, van den Berg said.
Los Angeles-based CBRE Global Investors acquired a majority of ING Groep NV’s real estate investment business last year. The combined company has invested about $1.5 billion in 15 Chinese residential projects since 1996, most recently in Shanghai and the southwestern city of Chengdu toward the end of 2007, according to van den Berg in an interview in November.
CBRE Global Investors usually jointly bids for land with a developer in China and then holds as much as 50 percent stakes of the development ventures, van den Berg said in November. Its partners have included Longfor Properties Co., controlled by the nation’s richest woman Wu Yajun, and China Vanke Co., the country’s largest developer by market value.
The fund’s focus remained on residential projects in China. It also likes mix-used properties, with about 60 percent made up of residential properties. Office buildings in first-tier cities usually have high prices and low yields, so wouldn’t be good investment, van den Berg said.
Beijing and Shanghai had the fastest office rental growth last year in the Asia-Pacific region, according to Cushman & Wakefield Inc. Beijing’s prime office rents climbed 75 percent last year to become Asia’s third-costliest office market after Hong Kong and Tokyo, while those in Shanghai jumped 24 percent.
“In general, China’s property market is still strong and robust,” said van den Berg. “The risk in investment in China is more at the upside.”