Foreign Private Equity Moves Into China's Real Estate Market

Filed in archive Private Equity on September 22, 2007

Asia Pulse is among a number of sources following the growing involvement of foreign private equity (FPE) in China's real estate market.

The venture capital company Zero2IPO is suggesting three reasons for the trend:

• Beijing real estate values are being impacted by the coming 2008 beijing olympic games.
  


• The 2010 Shanghai World Expo is having much the same impact on real estate values in Shanghai.
  


• The idea that an adjustment in the value of the Yuan will eventually come, and will make Chinese real estate more valuable in terms of Euros, Yen, or Dollars, has encouraged many foreign firms to view Chinese real estate as a way of taking advantage of anticipated exchange rate changes.

Add to these factors the fact that many China firms are running short of the capital resources needed to invest in their own real estate market and the door to foreign firms seems to be opening wider.

Zero2IPO's latest research shows FPE involved in 31 separate real estate investments in China in 2006. Those investments had a total value of over US$3 billion. In the first quarter of 2007, real estate was the largest investment sector for private equity in China.

In addition to the influx of foreign investment, Hong Kong and Shanghai Banking Corp (HSBC) has begun pouring private equity into Mainland real estate through Hong Kong, according to the Hong Kong Standard. HSBC has created a US$700 million private equity joint venture fund with Hong Kong-based property developer Nan Fung to buy Mainland property.