China overtook the US as the world’s biggest property investment market last year and will probably keep the lead this year on economic growth and a lower reliance on debt, Cushman & Wakefield LLP said.
Real estate investment in China more than doubled to US$156.2 billion last year, while the total for the US slumped 64 percent to US$38.3 billion, the New York-based broker said in a report yesterday. Excluding residential investments, the US came third after China and the UK.
“China will continue to see vibrant investment activity, despite recent government measures to cool down the property markets,” Donald Han (韓恩), Cushman & Wakefield’s managing director for Asia-Pacific capital markets, said in the report.
China’s economy expanded at an annual rate of 10.7 percent in the final quarter of last year, boosted by Premier Wen Jiabao’s (溫家寶) US$586 billion stimulus package. The US property market is being hurt by high levels of unpaid debt and a reluctance among banks to lend as they clean up their balance sheets, Cushman & Wakefield said.
China is taking steps to rein in the real estate market as price increases accelerate. The government in January reimposed a sales tax on homes sold within five years of their purchase and the People’s Bank of China raised the proportion of deposits banks must set aside as reserves to reduce lending. Property prices in December rose at the fastest pace in 18 months.
Eight of the world’s 20 largest property markets last year were located in the Asia-Pacific region, with Hong Kong, Taiwan and New Zealand registering gains in investment, the report said.
Cushman & Wakefield is the world’s largest closely held commercial real estate adviser.
Japan will see a revival after investment fell 48 percent to US$19 billion last year, it said. Some distressed properties are selling for less than their construction costs and average rental incomes tend to be higher than financing costs, making the market “compelling,” Han said.
US property investment will rise 50 percent this year on falling prices and an increase in distress sales.
“Large pools of frustrated capital” may be attracted to well-located properties with financially secure tenants, boosting prices, said Frank Liantonio, executive vice president of US capital markets for Cushman & Wakefield. “Distressed sellers begin to deal with a mounting volume of properties,” he said.
In Europe, most investors are focusing on the largest, most active markets such as the UK, France and Germany. Investment in the continent will probably rise 44 percent this year to US$152 billion, the firm predicts.
UK prices were among the quickest to bottom out after the global financial crisis began, with values falling 44 percent in the two years to July 31. The slide in prices and the pound’s weakness helped revive investment and lift property prices.
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