Direct realty dealings in China up 13.1% in Q2 2011

And Singaporean purchasers have dominated the largest transactions with three of the five largest Chinese deals.

According to Jones Lang LaSalle’s Asia Pacific Capital Markets Bulletin, China’s GDP grew 9.5% y‑o‑y in 2Q11, exceeding general expectations and despite y‑o‑y inflation rates of 6.5% in July. China’s growth, and its real estate market in particular, will continue to be ameliorated by governmental monetary tightening and cautious currency revaluations. With strong leasing demand and rising rents (particularly in Beijing where rents grew upwards of 11%), market fundamentals remain strong as the Chinese economy powers on.

Direct real estate transactions in China are up 13.1% on the back of strong activity in Shanghai, Beijing and Shenyang. Singaporean purchasers have dominated the largest transactions in 2Q11 with three of the five largest Chinese deals. Shenyang Longemont Shopping Mall in Shenyang was purchased by Perennial China Retail Trust from the unlisted Shanghai Changfeng Real Estate Development Company for RMB 3.7 billion (USD 575 million) in May.

The Mapletree MIC Fund bought Silver Court, a mixed development in Shanghai, for RMB 2.4 billion (USD 365 million) in April. In June, Singaporean property giant CapitaLand purchased the Taiyanggong shopping mall from an unlisted developer for RMB 1.7 billion (USD 268 million).

The largest domestic transaction was between two listed property companies. The New World Changning Commercial Centre in Changning, Shanghai, was sold by New World China to SOHO China RMB 3.2 billion (USD 492 million). Like last quarter, cross‑border capital markets real estate volumes have exceeded domestic volumes at 66% of total transactions.

Yield movements have contracted sharply this quarter as capital values registered strong growth, particularly in Beijing where prime office and retail effective yields contracted by 76 bps and 68 bps respectively. A lack of investable grade buildings in Beijing and Shanghai for middle‑term investors will continue to drive up capital values.