From the Wall Street Journal:
As some of Wall Street’s biggest real-estate investors weigh their next step in China after a bruising downturn, a rush of domestic players are filling the void, raising money and snapping up trophy properties… Domestic investors—including listed developers, private-equity players and wealthy individuals—were buyers in 83% of the deals larger than 100 million yuan ($14.6 million) last year, excluding land transactions, according to real-estate brokers CB Richard Ellis. In 2005, foreign buyers took 80% of such deals.
Aggressive domestic competitors are raising onshore bank debt, attracting investment from China’s growing pool of domestic investors and moving nimbly to land deals through their network of contacts. Foreign investors, in contrast, typically have a lower tolerance for risk, require approval on deals, and need to get capital in and out through China’s tight currency controls.
“Real estate is a highly restricted and regulated industry and the Chinese government has made it increasingly difficult for foreign investors to do deals in recent years,” says Joel Rothstein, a Beijing-based partner with the law firm of Paul Hastings, Janofsky & Walker LLP. “If you want to go into a tier-one city, good luck trying to compete against domestic money that can access bank financing and does not have to go through the foreign investor approval process.”
