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Kevin Kwong

HONGKONG investors are unlikely to withdraw from the mainland market, despite Beijing's economic cool down measures, according to the China arm of a Hongkong surveyors firm.

  Buyers were still optimistic about the prospects for economic growth on the mainland, said Eric Chan, managing director of CHK Surveyors (China).

  But sales of mainland property were expected to fall following China's tightening of control over its bank lending policy, he said.

  ''The short-term impact on the China property market will be a slight drop in sales,'' said Mr Chan.

  ''Though news of tightening control over the financial and property market has been circulating since March this year, it was the speedy implementation of these policies which had taken the market by surprise.''   He said developers which relied heavily on bank lendings were affected most.

  Some of them had to sell their property units earlier than planned so they could get back some cash to repay their loans.

  ''Meanwhile, the property buyers are holding back to see the effect of the more cautious policy,'' he said.

  Analysts believe the new policy will lead to a temporary slowdown of demand in China property from Hongkong, though it is unknown whether a long-term cautious policy will affect the market.

  ''The present market consolidation will weed out some of the property projects that have unstable financial backing, and the market will soon be left with projects that are financially sound and properly organised,'' he said.

  ''This will enhance the confidence of the property investors. It is certainly a good thing in the long run.''   Although sales in Hongkong are expected to slow, overseas investors' interest in the China property market is not likely to be affected.

  ''Hongkong investors focus on buying properties in the Pearl River delta, while other overseas investors prefer to buy properties in the northern part of China, such as Beijing, Shanghai and Hangzhou,'' he said.

  ''They are still optimistic about the economic growth in China in the long run and are unlikely to back off from investing in its property at the present stage.''   However, the slowdown in property sales will not affect the prime site sales.

  ''Prime areas such as office, as well as retail units in Guangzhou, will remain popular and sales,'' Mr Chan said.

  The performance of the China property market in the first half of this year showed there was a close link between demand for China and Hongkong property, he said.

  ''Earlier last year, any China property that was put on the market was sold right away, within days,'' he said.

  ''Investors showed little concern about the location of the property, whether it had a good infrastructure or whether there were extra facilities within the development. The demand greatly exceeded the supply at that time.

  ''However, due to the slowdown of the local property market in the final quarter last year, the China property market also became sluggish and went quiet for about five months.''   As the local market started to pick up in the first four months of this year, the China market also recovered quickly, and more than 40,000 units were supplied into the market within the first half of this year.

  ''However, the investors have become cautious in selecting where they should invest and they now focus only on property that has a good infrastructure, such as electricity and water supply, and telecommunications network,'' Mr Chan said.

  ''Well-developed cities such as Guangzhou, Shanghai and Beijing are now the 'hot spots' for investment and it is important that a electrical railway network exists near the development.''   According to Mr Chan, out of the 40,000 units, a third of them had been sold in Hongkong.

   and the rest were either sold within China, or to overseas investors. Buyers included those from Singapore, Malaysia, Taiwan and Japan.



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