Blackstone reenters China's real estate market

Blackstone Group LP, the world's biggest private equity firm, has entered China's property market again through financial cooperation with a realty developer. This may be a sign that foreign funds are keen on China's housing market, analysts say.

Media reported that Blackstone has reached an agreement with Hong Kong-based Great Eagle Group to jointly develop land blocks in Dalian. Great Eagle said in its half-year report that half of its Dalian project is held by an independent third-party company, but declined to give the name.

Facing strict regulation policies, China's housing market suffered falling transactions and falling prices. Fixed-asset investment in the realty sector is declining, but foreign companies have become more interested in this market in recent months.

Foreign investment in housing development has been on the decline since May 2009 but unexpectedly saw an upsurge in June this year. Utilized foreign capital in the housing sector hit 8.1 billion yuan in June, higher than the sum of the previous two months.

Foreign firms, such has Morgan Stanley, Goldman Sachs, Macquarie Group, UBS Group, Merrill Lynch and Softbank Asia, have entered China's real estate market in various forms, according to today's China Securities Journal.

Financing difficulties brought by tightening credit and housing regulation policies are believed to be one of the reasons why domestic housing developers turn to foreign investment giants for funds.

Besides the form of private equity, housing developers, including Gemdale Group, Longfor Properties and Country Garden Holdings, chose to issue corporate bonds with high interest rates in overseas markets.

Meanwhile, China's housing market still has a bright future, despite current tightening policies. For global investment firms, this provides a chance for bargain hunting.

Expectations that the yuan will appreciate have also positively impacted the housing market. Qilu Securities pointed out that in the early stage of appreciation, a large amount of foreign capital will seek to be converted into yuan to gain benefits from the appreciation. In addition, real estate is the major investment target of these funds.

By People's Daily Online