Chinese Second-tier Cities Are Ready for Real Estate Investment

Top Quote The Chinese government has announced a new round of cooling measures which appeared to take effect as the overall value of transactions plunged 60% q-o-q to US$19.46bn, according to a recent research by DTZ. End Quote
  • (1888PressRelease) October 15, 2010 - China has ordered banks to impose a 30% deposit on home loans and stop lending for third or more properties as part of a new move to curb soaring real estate prices.

    As a result, the number of land deals fell by 60% and 46% in first-tier cities and second-tier cities, respectively. Second-tier cities recorded US$15.32bn worth of transactions in Q2, compared to that of US$4.13bn in the first-tier cities.

    "As the first-tier cities, such as Beijing and Shanghai, were experiencing limited availability and the high cost of urban sites, the hunt for higher yields continues to push investors to ever more distant frontiers. In 2009, developers and investors continued to shift their investment towards second- and third-tier cities, creating a powerful second-tier market. Dalian, Tianjin, Chengdu, Suzhou, and Hangzhou have been leading this trend, with Wuhan, and Changsha also readying themselves for investment," an analyst from Deloitte says.

    Allen Lau, Managing Director of Colony Capital, believes that fundamentally long-term demand for housing is still strong in China due to its urbanization and increasing disposable income and upgrade needs associated with it, second-tier cites are developing at a rapid speed and have great potential, people should be positive on the long-term health of the sector.

    Allen Lau will be speaking at the 5th Annual Real Estate Investment China Summit 2010 on the 1st and the 2nd of December in Beijing, China.

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