Morgan Stanley, which bought $8 billion of Japanese real estate last year, has said that it will triple its investment in Chinese property this year, shifting emphasis away from Japan in a bet on the world's fastest-growing major economy.
The world's third-biggest securities firm will add US$3 billion to investments in China this year, said Sonny Kalsi, global head of real estate business at Morgan Stanley, in Tokyo. The New York-based company has bought US$1.5 billion of Chinese property in the past five years, he said.
Morgan Stanley is betting economic expansion that averaged 9.2 per cent a year over the past decade will drive prices higher in a market that saw Shanghai property values almost triple in six years.
Land prices in Tokyo rose last year for the first time since 1990 as Japan's economy, the world's second biggest, grew at its fastest pace since 2000.
"We have a very constructive view on China. We like the economic story and we like the real estate story," Kalsi said.
"We have a very deep pipeline and there are a lot of things going on. I wouldn't be surprised if we invest this year as much capital in China as we do in Japan." Kalsi added.
China's government last year raised minimum mortgage rates, tightened lending restrictions and imposed taxes to slow the rise in urban property prices, which it said threatened social stability.
Jeff Yau, analyst at Kim Eng Securities in Hong Kong said, "Shanghai was overheated last year."
Michael Hart, head of research in Shanghai at Jones Lang LaSalle said, "Prices have come down 15 to 20 per cent and are approaching a reasonable level, China offers a lot of room for institutional investment in real estate.
"What we're seeing is just the first wave," Hart said. "Of the top 50 office buildings in Shanghai, only two or three are owned by foreign institutions."
According to Hart, Price gains in Shanghai, Beijing and other population centers won't scare off global investment.
"The issue in China isn't price, it’s finding properties with clean and clear title, overseas investors including Morgan Stanley, Goldman Sachs Group, Ripplewood Holdings and Lone Star Funds went on a spending spree in Japan during the late 1990s, buying commercial real estate from banks laden with bad-loan collateral after the nation's 1980's bubble economy collapsed," Hart added.
Meanwhile Singapore's biggest developer Capital and Hong Kong giant Sun Hung Kai Properties said they will team up for projects in markets such as Singapore, Hong Kong and China.
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China real estate is hot property
Tue, 14 Mar 2006
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