Investing in real estate in China is far from straightforward for foreign managers. Jonathan Hsu, M&G Real Estate’s Asia head of research, tells PERE how capital controls are among two key challenges faced by overseas investors looking to deploy funds in China.
“I would say, from a real-estate perspective, it would be more from a pricing perspective.
And with China, I think for us we would more look at Tier 1 cities such as Beijing, Shanghai and possibly Guangzhou and Shenzhen.
The pricing in those markets has fallen to as low as 3 percent, maybe even sub-3 percent for office yields.
From a pricing perspective, it doesn’t look particularly attractive when we can get the same type of yields in developed markets around the region.
Number two, as an investor into a foreign market you would want to be able to distribute your cash back out to your investors.
Now, the capital controls in place does not mean that this can always happen. There are structures and legal ways to get your money out, but it does complicate the process.
And there isn’t always a level of certainty that the cash can be repatriated outside of China when you need it.”