A revised list of Guidelines on Foreign Investment
released by the central government will not likely have any
significant impact on the country's real estate market, industry
experts have agreed.
The new guidelines, jointly issued last week by the National
Development and Reform Commission and the Ministry of Commerce, are
the latest revision to the previous version, which was issued in
2004.
Effective December 1, foreign funds being funneled into housing
agents and brokerages will be restricted and foreign capital
flowing into the development of large-scale land lots and the
construction and operation of high-end hotels, villas, office
towers and exhibition and convention centers will also face
restrictions.
Given that foreign investment accounted for just 4.4 percent of
total real estate investment in Shanghai in 2006, the impact on the
overall market is not likely to be significant, experts said.
However, it is widely agreed that further elaboration on the new
policy, particularly the newly promulgated areas of brokerage and
agency business, will need to be evaluated to see its real impact
on foreign investment.
"I can't see any impact on foreign investment at the current
stage until further details and practical guidelines are introduced
by the government," said Remy Chan, regional director of Asia
Pacific at Jones Lang LaSalle, one of the top five real estate
service providers in the world.
Colliers International had similar thoughts on the
guidelines.
"It is noted that major measures to restrict foreign investment
in the real estate industry were already promulgated last year as
contained in Document No. 171. The revised list suggests no
substantial change to the policy on the real estate industry,"
Colliers, one of the world's top five real estate agencies, said in
a commentary e-mailed to Shanghai Daily last week. "The
devil is in the details."
"We note that the revised list is issued against the background
of continuous yuan appreciation, which hit successive record highs
to 7.42 yuan against US$1 on November 8," Colliers said.
"Restriction on foreign investment in certain industries would thus
help to slow the inflow of foreign capital.
"The revised list also echoes the steer from the 17th National
Congress of the Communist Party of China on industry restructuring
toward quality growth. The revised list therefore should be viewed
more as an overall adjustment to steer the direction of foreign
investment than specific measures targeting an individual
industry," Colliers added.
However, industry experts said several points found in the
revised version could be noteworthy.
For instance, foreign funds being funneled into housing agents,
brokerages and the second-tier real-estate market will face
restrictions.
"This is definitely good news to domestic real estate agencies,
which generally speaking are quite weak when compared to their
counterparts overseas," said Xue Jianxiong, head of research at
Shanghai Youwin Real Estate Information Service Co Ltd. "The new
policy has indicated the state's effort to nurture domestic housing
agencies that have almost lost their ground to overseas players
particularly in the second-hand property sector."
According to Youwin's research, agencies with overseas
investment background have already taken a major share in the
city's second-hand property market. The list includes Midland
Realty, Centaline, Century 21, Coldwell Banker and Hanyu
Property.
Only a few strong domestic players exist such as 5i5j and
Hopefluent.
"This new measure may suggest that the government wants to
somewhat restrain foreign players' participation in the trading of
properties, probably against the upsurge in property prices, which
according to some market commentaries was partly fueled by an
increase in foreign acquisitions," Colliers said in the statement.
"There may be some impact on transactions in the mid-to-high end of
the property market where foreign players mainly participate.
However, given the rather diversified structure of foreign
participation in the second-tier market and real estate
brokerage/agency business, the delineation of foreign participation
in this market segment has yet to be ascertained."
(Shanghai Daily November 13, 2007)
