Chinese investors looking outside China after interest rate hike

With China raising lending rates yet again, analysts expect more Chinese investors to look at property markets in other Asian countries for better returns.

Chinese policy makers recently increased their one-year lending rates to 6 per cent.

Property developers in markets like Malaysia want to attract mainland Chinese buyers, who are finding mortgage loans in China harder to maintain.

China hiked lending rates this week to cool inflation and real estate speculation.

Some Malaysian real estate developers are now homing in on Chinese buyers.

Abraham Jacob, Manager of Malaysia Property Incorporated, said: “We are not only looking at the investors from China. But also the affluent Chinese business professionals and the high net worth individuals who are already in Singapore.

Analysts said Chinese buyers stand to make a nice profit from owning Malaysian homes, especially in major cities like Kuala Lumpur, Penang and Johor Bahru.

Dr Chua Yang Liang, Head of Research for Southeast Asia at Jones Lang LaSalle, said: “If you look at the premiums, in terms of the returns, the asset returns are typically still higher than returns on the financial instruments so there will still be some attractiveness in their asset portfolio.”

High-end homes in major Malaysian cities have seen prices climb by 7 to 10 per cent per year for the last three years. Including rental income, prime properties can offer returns of up to 10 to 12 per cent annually.

This is much higher than the 3 per cent returns on bank savings for the Chinese, which does not even cover inflation, which was 4.6 per cent in December.

Still, not many Chinese investors are risk takers when it comes to property. And that is something that developers in the region want to change.

Neo Keng Hoe, Head of the Singapore Office for Malaysian property developer SP Setia, said: “As long as you do it correctly, you give comfort and confidence to the prospective investors, I think going into the Chinese market in the same manner, you will be able to yield results as well.”

Analysts said China needs to raise lending rates even higher to tame inflation. And that may fuel more Chinese demand for properties elsewhere in Asia.

Source : Channel NewsAsia – 11 Feb 2011

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