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Home away from home

Updated: 2011-06-17 14:18

By  Lu Huaiyuan (China Daily European Weekly)

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China's recent moves to tighten soaring home prices have pushed investors to turn to London's property market, Chinese buyers and analysts say.

The property sector in the UK is more stable for investment while its Chinese counterpart is a more speculative one, says Xiao Ken, president of Chinese Property Professionals Society (CPPS).

"I can't afford a flat in Beijing or Shanghai, but I can buy one in London," says Xiao, who is viewing properties in London despite the fact that housing prices in the UK are still significantly higher than that in China.

Residential prices in 76 out of 100 cities tracked by SouFun Holdings Ltd show average home values nationwide at 8,819 yuan (934 euros) per square meter. That means a 140-sq m flat in China is on the market for more than 1.23 million yuan (130,000 euros).

The average home in London is 408,534 pounds (457,700 euros).

But Xiao still says he will buy a house in London because the returns will be higher in the stable market.

The Chinese government's efforts to restrict soaring home prices are also an important reason why more Chinese buyers are investing in London's properties.

That makes it easier for the CPPS, which is a unique information platform for Chinese investors in London, to get funding than previously.

"Some real estate companies now come to find us to offer funding as they are also eyeing potential Chinese buyers," Xiao says.

Cici Dong, the head of the Asia Pacific desk at the London-based housing agent Savills, shares Xiao's view.

"As property prices in China have almost reached its upper limit, as well as with high inflation and unstable equity market, Chinese investors hope to invest their capital in the stable market," she says.

Some expect Chinese authorities to expand a property tax nationwide following a trial in Chongqing and Shanghai, Xinhua News Agency reported on May 29, citing Chongqing Mayor Huang Qifan.

Beijing's municipal government also released a package of rules in February. Non-Beijing residents must show proof of payment for their monthly social security contribution or income tax for five consecutive years before they are eligible to buy their first apartment in the city.

The move states that people with Beijing hukou, or household registration, can buy only two properties and eligible non-locals will be allowed to buy only one property.

While property prices in April still rose year-on-year in 67 of the 70 major cities, according to the National Bureau of Statistics, some analysts in China predict that home prices are likely to drop by 10 to 15 percent this year.

In comparison, both Xiao and Dong say the property market in the UK is "stable", which may make it attractive for rich Chinese as more Chinese super rich eye London's prime market.

But the rise of Chinese in the prime market should not be exaggerated, Dong says.

"Investors from the Chinese mainland over the past two years are actually the first generation of investors expanding to the overseas prime property market. They still need two to three years' experience to operate in London's prime property market so they will feel more confident of their investment decisions," she says.

Mainland investors are still not as matured as Hong Kong and Singapore investors who have been involved in the market much longer and are more sophisticated.

"If you offer them an investment proposal, they can respond very quickly on whether to take it or not. Those from the mainland are more cautious and careful as they are very new in this market," Dong says.

She says one "tricky" aspect was how her Chinese mainland clients "don't usually listen to the landlord's introduction of the properties" during viewings, but "just visit the private properties like a museum".

Zhang Haizhou contributed to this story.

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