November 25, Chinese developers are starting to bet on a future in developing properties thousands of miles away from home as more and more domestic enterprises look to flee tough restrictions on property investments in China that are starting to seriously impact the local real estate market.
From Chinese billionaire Huang Nubo’s attempt to buy land in Iceland to the high-end residential properties launched by Vantone Real Estate Co. Ltd. (600246.SZ) in Taipei, Chinese developers have demonstrated an interest in property developments outside the mainland.
Beijing-based Huang, a former central government official-turned property investor, ventured out to buy a 300 square kilometer parcel of land in Iceland in August, on which he said he would develop tourism property projects. The parcel covers almost 0.3% of Iceland’s total area and is expected to cost Huang some $8.8 million.
But Huang’s bold move has ruffled political sensitivities in the Nordic country -- his previous relationship with the Chinese government has prompted fears that Beijing could be seeking to gain a strategic foothold in the North Atlantic through the deal.
Huang said in a Nov. 11 interview with the China Business News that the Icelandic side would most likely approve the deal, but that he was still waiting for confirmation.
Vantone
Feng Lun, chairman of Beijing-based Vantone, said Chinese developers are seeking overseas opportunities because of higher market efficiency, more diversified asset allocation and the growing Chinese diaspora.
Vantone announced in August last year that it would spend RMB 500 million on leasing more than 5 floors of New York’s reconstructed landmark building, One World Trade Center, for a period of 20 years and 9 months.
The space, named the China Center, would be a 190,810 square foot business and cultural facility, located on part of the 64th floor and the entire 65th through 69th floors of One World Trade Center. The landmark project is expected to be completed by 2013.
The people behind the China Center hope it will become a platform for Chinese investors seeking opportunities to spend their money in the U.S.
Domestic Pressures
Rising interest rates and tightened property restrictions for buyers and developers are delivering a direct blow to the domestic property market, with all of China’s top-tier cities -- Beijing, Shanghai, Shenzhen and Guangzhou -- reporting decreases or slower growth in home prices over the past few months.
China has expanded its property curbs this year from hiking down payment and mortgage rates to imposing purchase restrictions in around 50 cities.
The latest data on the sector released by the National Bureau of Statistics showed that home prices in October recorded the worst performance so far this year, shrinking in 33 out of 70 cities monitored by the government from September.
That has in part contributed to mainland developers’ search for overseas property investments.
“The trend became apparent soon after the first investment restrictions were imposed on the mainland more than a year ago,” said Rebecca Shum, executive director of international project marketing at real estate services company CB Richard Ellis.
They’re looking for a safe place to put their money and still believe real estate is the best investment,” Shum was quoted as saying by the South China Morning Post.
In August, Vantone became the first mainland developer to build residential homes in Taiwan. The developer is planning to sell 276 units at the upscale project, catering to demand from high-end buyers from mainland China and abroad.
Cai Weimin, a Taiwan-based property expert, told the 21st Century Business Herald that properties in Taipei would attract more mainland Chinese buyers because they offer much sought-after permanent ownership.
A loosening of travel restrictions on visitors from the mainland to the island would also boost interest, Cai said.
AVIC Real Estate
Not all overseas deals are successful for Chinese enterprises though. State-owned AVIC Real Estate Co. Ltd. (000043.SZ), a Shenzhen-based developer engaged in building commercial and industrial properties with a long history of tapping overseas markets, recently pulled the plug on a deal to buy land in Sri Lanka’s capital Colombo.
The company announced in August that it would by a plot of land in the city to develop a HOPSCA (hotel, office, park, shopping mall, convention center and apartment) project, but withdrew the plan earlier this month after the Sri Lankan government changed the permanent ownership status of the land to a 99-year lease.
Source:21cbh.com