Caution sentiment prevails amid China's U-turn on foreign investment

TH Real Estate says it will not rush into mainland projects after curbs end

PUBLISHED : Wednesday, 23 September, 2015, 12:03am
UPDATED : Thursday, 24 September, 2015, 11:28am

Foreign investors will need some time to adjust to China's about-face on property investment, with many expected to take a cautious approach as the authorities extend a welcome to individuals and institutions amid the sudden cooling in the sector.

Mike Sales, the head of TH Real Estate, one of the world's largest real estate investment managers, said his company had no immediate plans to ramp up investment as barriers came down and instead would seek to execute in a timely manner.

"In the long term from our prospective, it is positive. Does it mean TH Real Estate will have explosive investment in China in the short term? Not in the short term, until we found a strategy that suits our clients," Sales said.

China announced last month it planned to unwind barriers that had been imposed to curb foreign individuals and real estate companies buying into the property market.

Last month, the central bank, commerce ministry and four other ministries scrapped rules that required foreign investors to pay the full amount of registered capital for their mainland Chinese entities before taking any loans or applying for foreign exchange transactions.

However, the foreign investors will still be subject to restrictions by city governments.

Sales said the softer requirement for equity reserves would make it easier for investors to deploy capital, particularly in the development stage of projects, leading to enhanced profits.

However, the relaxation of rules is unlikely to lead to major changes in inflows in the short term.

Sales said he believed the risks outweighed the opportunities but the right local partnership could help navigate the risks.

Among its retail portfolio holdings in China, the company invests into designer outlet malls in Tianjin, Shanghai and Guangzhou.

Sales said he did not expect the country's economic slowdown to translate into dampened activity at the designer outlet malls.

"It is very interesting. In Europe, Italians were still buying discounted luxury goods during the economic challenges in the global financial crisis in 2008-09," he said.

As a general rule, consumers often make a habit of shopping at discount stores during an economic downturn.

"That is why we like the sector," Sales said.

He added that the company's designer outlet mall in Tianjin, known as Florentia Village, had recorded sales in excess of 2 billion yuan since it opened in 2011.