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Kenneth Ko

WITH SO MANY new projects up for grabs in different mainland cities, the big question  is how to find a good investment.

Location is the most important factor. Properties that are most in demand are  apartments in prime business districts and embassy areas with direct access to the subway or a major traffic network.

Andrew Ness,  executive director of research for CB Richard Ellis in Asia,  said investments were primarily focused on  luxury flats  in first-tier cities such as Beijing, Shanghai and Guangzhou, where expatriates and high-income mainlanders were willing to spend more to enjoy a better living environment.

He said projects in mature commercial areas generally produced stable investment returns and offered better amenities and facilities to make daily living easier.

People who worked in these commercial areas were the main tenants or occupiers of luxury apartments.

Mr Ness said when it came to rental income, properties that provided professional management and superior design usually enjoyed higher  returns. He said investors could for example expect a net rental return of between 5 per cent and 7 per cent  a year for luxury properties in Beijing.

Investment in a luxury property also presents good prospects in terms of price appreciation.

'From the experience of Beijing, the return from the increment in price is much higher than the return from rental income,' Mr Ness said. 'Also, the additional return from the anticipated appreciation in [the] yuan further increases the attractiveness of mainland property investment to overseas investors.'

Luxury villa projects  close to airport expressways and in well-developed areas are also considered a good investment.  Senior executives who work for multinational corporations frequently  choose to lease villas in these suburban districts as airport expressways make it easier for them to commute between the city centre and the suburbs, Mr Ness said.

The  educational, medical and recreational facilities in mature villa developments   helped draw tenants looking for a better quality of life.

Mr Ness said in addition, villa tenants were often willing to live in such areas for a long time, so when leased out, the units produced a stable stream of rental income.

When it came to reselling a property, investors should bear in mind the more complicated taxes and levies payable.  People reselling a luxury property within two years after purchase  paid higher taxes.

Mr Ness said investors  had to pay a business tax equivalent to  5 per cent of the resale price within two years of the purchase.

He said that if the luxury property was resold after two years, the tax was lower at 5 per cent of the difference between the original purchase and resale prices.

Investors also have to pay construction and maintenance fees equivalent to 7 per cent of the business tax upon resale. Deed tax is  about 1.5 per cent to  3 per cent of the sale price.

Mr Ness  said that luxury property investments were not suitable for investors seeking a short-term profit.

They were more suited to those who had a long-term investment plan and were looking for stable returns.



Location is the key to a good investment