Vigers International Property Consultants recently released new advice for potential investors looking at options just over the border. It says in Shenzhen, the Municipal Bureau of Land Resources and Housing Management and the Shenzhen office of the State Administration of Foreign Exchange issued a joint circular in July to restrict foreigners from buying houses. Foreigners are allowed to buy one residential property unit for their personal use only after they have resided or studied in China for more than a year. Residents in Hong Kong, Macau and Taiwan, regardless of their length of residency in China, can buy only one unit of residential property for personal use.

If you have the money and are a Hong Kong permanent resident, it's a good time to be investing, particularly in the mainland's second-tier cities, says Mr Lee. 'There are many drivers generally, but in the long-term, increasing urbanisation, population growth and increased income and a growing middle class means that cities such as Tianjin and Chengdu could be good investments for a few years down the track. The government is also spending money on these cities to make them better transport and office hubs, improving infrastructure and beautifying them, all of which will add to a property's value.'

While second-tier cities are becoming more popular, the most preferred investment destinations are relatively mature markets such as Shanghai and Beijing, where the market is better regulated and hence less risky, says Andrew Ness, executive director of CBRE Research for CB Richard Ellis. This is because they are being supported by strong market demand from both end users and investors.

'Both of these cities also have active secondary property sales markets,' Mr Ness said. But he adds that the downside of first-tier markets such as these - as far as yield-motivated investors are concerned - is that investment yield has been under continuous downward pressure after five years of capital appreciation.

While buying property on the mainland can be a good investment, there are some things to watch out for, says Mr Lee. These include ensuring that you work with a reputable developer. Some residential complexes in Shenzhen are only three to five years old, but they look about 20 years old because the upkeep from the management is not good. If you don't work with a good developer, the likelihood is that the finish on the residential properties could be shoddy, he says.

Mr Lee suggests co-operating with a known Hong Kong developer - and there are many doing extensive work on the mainland - or with developers who have joint ventures with mainland firms. Or go for a reputable mainland developer such as Country Garden.

Mr Ness agrees, adding that buying properties developed by large, well-established developers, who are usually also listed developers, is a good choice.

'In addition to reputable Hong Kong and overseas developers, reputable, well-established local developers such as Vanke, Poly, Forte and China Resources are also highly consistent with respect to the kind of high-quality product which they deliver.

'However, in terms of pricing, these developers also command a premium for their properties.'

Mr Ness strongly recommends that a prospective investor closely study the development strategies of those successful Hong Kong and Southeast Asian developers before making their decision on which city to invest in. As those investors have begun to focus increasingly on the second-tier market, 'buyers would be well advised to pay careful attention to the geographies and specific locations where these successful regional developers have heavily concentrated their attention', he says.

While there are considerable investment options, potential pitfalls when buying property on the mainland not only include the risk that a less reputable developer may do shoddy building work, but the fact that it is not a 'pure market'.

'The mainland property market is not a 'pure market' in the sense that it remains heavily susceptible to government interference as a result of frequent policy change,' says Mr Ness. 'The authorities are inclined to frequently intervene in the market by adopting administrative measures rather than leaving market change up to market forces. Frequent administrative interference can make it relatively difficult to forecast market change in China based on simple market indicators.'

Mr Ness does not regard third-tier cities as ideal investments areas as they lack sufficient liquidity and depth, not yet having given rise to relatively mature secondary property sales markets.

Also, the relatively small economic scale and the limited influx of new inbound residents do not give rise to robust demand.

Of course, in many cities, the property that you are contemplating buying might not even exist yet. Pre-sales are a prevalent form of sales in the mainland property market, and as such - again if it is with a good and reputable developer - there is plenty of security for the investor along the way in terms of the initial contract signed to ensure that the developer carries out all the requirements.

'Having been in practice since the early 1990s, pre-sales procedures have reached a relatively mature stage of development right now,' says Mr Ness. 'When making a pre-sale transaction, the buyer will sign a pre-sale contract with the developer, which stipulates several key construction specifications which the subject property must attain. After the property is completed, the buyer can have a quality check carried out with respect to the property after it is handed over by the developer. Should the buyer discover defects or quality problems, they can seek remedy or compensation from the developer.'

Three or four months ago, residential properties in Chengdu and Chungking cost 3,000 yuan to 4,000 yuan per square metre. That price has risen to 6,000 yuan.

Considering the level of demand for residential properties in first-tier and second-tier cities, as well as for commercial properties in first-tier cities, both may be considered as potential investment options, says Mr Ness.

'High quality, well specified, competitively located residential properties in both tier-one and tier-two cities, as well as commercial properties in tier-one cities are good investment options.'