Shanghai RE to slow in ’08

Investment in Shanghai´s real estate market is expected to grow less rapidly and become more vulnerable to policy uncertainties in 2008, according to several large real estate service providers.

Real estate investment saw a slowdown in the fourth quarter last year, with only one notable sales transaction completed in the city, after the government implemented the land appreciation tax and imposed additional restrictions on foreign investment in the sector, according to Jones Lang LaSalle.

"Increasing monetary control and tightening policies are bringing more uncertainties, particularly to the investment market," said Lee Hingyin, director of Research & Consultancy at Colliers International (Shanghai). "The investment market may feel the pinch, and it is likely that foreign investors will be more vulnerable to these policy changes this year," said Lee, adding that he expects more severe measures, which will significantly cool down the investment market.

James MacDonald, senior manager of Research at Savills China, however, said: "In the institutional investment market, it´s not necessary that new policies will be introduced and will affect the market in a big way. Instead, it is the more stringent implementation of previous regulations that has to be
watched."

"The government´s tighter monetary policy this year is expected to have a negative impact on the real estate investment market, which is highly dependent on bank loans," said Chen Sheng, director of the China Index Academy, which tracks property prices.

Wang Qing, an economist at Morgan Stanley Asia Ltd, said in a report that sectors with a high debt-asset ratio, such as real estate, tend to experience larger declines in fixed-asset investment growth after credit tightening. The debt-asset ratio of the real estate sector is over 70 per cent.

Liu Shiyu, deputy governor of the People´s Bank of China, the country´s central bank, said the government will strengthen commercial real estate management and adjust the real estate credit structure to prevent risk.