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Cool on Shanghai properties

SHANGHAI will likely suffer a plunge in overseas real estate investment this year as sellers and buyers are unsure about the capital values of properties, a major real estate services provider said yesterday.

Overseas investors are set to make only 5 billion yuan (US$732 million) worth of en-bloc acquisitions this year in Shanghai, a dive of nearly 70 percent from the 15 billion yuan in 2008, DTZ, which helped conclude 70 percent of investment deals in the city last year, predicted yesterday.

"No entire-building deal has been completed in the city since September as wide price gaps still exist," said Jim Yip, director of investment for DTZ's Shanghai operations. "Landlords still feel reluctant to yield while investors all want to reap bargains at bottom prices."

Existing properties with leasing contracts in major gateway cities such as Beijing and Shanghai will be more popular among overseas investors while retail and residential properties will be the most favored types, DTZ said.

"Retail facilities, especially those in prime locations and good property management, will probably be highly sought after, but it could be very hard to find buyers for Grade-A office buildings which are currently plagued by a glut of supply as well as shrinking demand," Yip said.

Moreover, DTZ estimated that comparatively small deals would more likely be done as the market is still rather sluggish. A single acquisition will not likely be above 1 billion yuan this year - a sharp contrast to several-billion-yuan deals frequently seen in the past.

En-block purchases by overseas investors fell by more than 25 percent in Shanghai last year due to a central government curb on "hot money," a lack of liquidity in the global credit market and a shift to more developed markets, property services adviser Jones Lang LaSalle said earlier.


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