Investing in China is much easier than you would expect, and the potential, far from being a needle in the haystack, is absolutely everywhere. New government regulations actually encourage foreign investment and make the process a whole lot easier than you would imagine. In line with government regulations, developers standardise the transactions in a format that is reasonably straight forward.

There has already been collosal gains in the flag ship cities of Beijing and Shanghai, followed closely by Shenzhen and Guangzhou- to such an extent that the government introduced cooling down measures. These measures have bought gains down to around 10% annually, and generally encourage investors to hold onto to their land for a five year period as response to rampant (and successful) speculation, and to avoid property developers manipulating the prices artificially. There was a time when it was possible to by off the plans then flip the asset with a handsome profit. Those days are now gone, however it is still possible to double or triple your investment over 5 years, while receiving around 8% rental yield annually in the interim.

The savy investor is now looking to so called "tier 2" cities (in essence these are the capital cities of provinces) such as Wuhan, Xi'an, Chongqing and Chengdu which all have strategic advantages and preferential government policy, and which is attracting vast foreign investment in both the commercial and residential spheres. Right now we are seeing 30% increases on real estate over 6 months while the government invests massively in infrastructure to address the imbalance of income disparity. For example Xi'an, which will have its underground train network completed within 4 years, has recently connected a bullet train to surrounding cities, and which reduces travel time considerably, and in style. An astromonical leap from the cluttering, crowded beasts that were previously the norm.

Many are betting that inland cities will soon follow the Eastern hub cycle of significant gains before settling at a much higher level. Prime 110m2+properties can be picked up for around $NZ100k in cities all over inland China, and the risk is not substantial as I see it. One aspect which is particularly attractive is the duel purpose model encouraged by local governments, allowing developments to be used for both residential and commercial use, thereby not limiting potential tenants. The ability to choose great, central locations with managed facilities in cities with 8 million people and more (serious purchasing power) is excellent news for kiwi investors, indeed all investors with some nous. It also offers great chances for new investors looking for a break with the kiwi market becoming inaccessable to some.

In fact I have been in China for 3 and a half years and have already bought two brand new properties in sweet locations which receive a rental yield of around 8% annually, while actual property values are increasing on a daily basis. One property in particular was picked up for less than NZ$800/m2, and has bounded forth admirably. We paid a further $6000 to rennovate the place from a concrete shell to spanking new mint condition. Had we pushed the boat out and spent $10,000 we would have had a palatial result. We are awaiting further surges as the subway, swimming pool, Gymnasium and cafe are completed, while the location is to die for. I intend to add a further 3 properties to my portfolio over the next several months in Tier 2 cities.

The key, as ever is to do your homework and/or have someone on the ground in China who knows what they are doing. In that regard I can highly recommend Sino-NZ Investment Group who specialize in the field

*Yes it is my company as you may have gathered, our mission is simply to help people enjoy these substantial investment opportunities, an endeavour in which we have already had resounding success if feedback from our clients, and the sheer statistics are anything to go by.

We have specialist Chinese realtors at our disposal and only deal with legitimate licensed developers. In addition we take care of translation of all documents through independant and authorised professionals, which are notarised and, as such, bound by Chinese law. You will have peace of mind at every phase of the operation. Investing in China does require a little patience and imagination, however for the brave, sharp increases can be relatively safely anticipated in my opinion.

There is also the issue of the Renminbi (Chinese currency) which has finally unpegged from the US$, and while still heavily regulated is making slow gains with the potential to lift sharply in the face of US pressure, or more likely when the timing is right for China to increase its value. No one is entirely sure when that will be. In my own assessment I believe it will continue plodding up for some years to come. Add to that the current high of the kiwi dollar and this issue alone could net a substantial windfall.

The Chinese market is not to be feared, though obtaining the services of someone experienced and trustworthy to help you navigate through potential hazards, and avoid becoming a horror story is highly desirable.

If you have any questions about China real estate I am happy to help. Drop me an email. Extensive, detailed information also available at our website


Regards

TLS
MD Sino-NZ Investment Group

I agree with TLS. I am UK-based and have bought properties in Zhuhai. I think that Chongqing and Chengdu are also excellent cities in which to invest. I am looking for local partners in these latter two cities: I alread have contacts in Zhuhai and Shenzhen.

If you are a Chinese realtor who speaks English and who would like to attract investment from the UK please contact me straight away. I have a colleague who is fluent in Mandarin, so we can hold discussions with your staff too.

I completely agree about the returns possible on Chinese real estate 20 to 30% per annum has been achieved in many areas. Rental yields are strong also. It may be possible to arrange financing.

Outside of the main cites on the east coast, where are the best places to consider investing in property? Is pisking the tourist hotspots likley to be a good starting place?

Stephen Chung of Zeppelin Real Estate has estimated total returns from the ten largest cities in China between 2002 and 2006. The spread is quite low, with the worst performing being Guangzhou (total return around 18.4% per annum) and the best performing being Tianjin (total return about 24.7%).

My own preference is for the Pearl River Delta area, particularly Zhuhai. This has (i) a strong infrastructure story (bridge from Hong Kong due in five years, fast rail link to Guangzhou already under construction, Metro system under construction (ii) a good location, close to Macau, Hong Kong, Shenzhen and Guangdong, (iii) a very clean environment with virtually no air pollution, and (iv) a mixed economy with a higher leisure and tourist sector than most Chinese cities. Property prices are still relatively low, with apartments in modern blocks in central locations available for under RMB 10,000 psm.

I believe that Tianjin might continue to perform well. Chengdu is building up its high-tech manufacturing and software sector, so should also perform well. Chongqing has great tax advantages and much central government support, as well as continued benefits from being the most recently created metropolitan area (independent of the provincial government, in this case the Sichuan one).

My colleague, who is currently researching property prices in China, has more information and would be happy to discuss investment opportunities with you,

Steve Hemingway,
Ming Wei Real Estate Investments