Making the experience count

Another important factor that is attracting Chinese property companies is the accommodative financing environment. China Business News recently reported that interest on loans is only around 4 to 5 percent in many foreign countries, with lower financing costs and multiple financing channels.

"It takes time to establish the reputation of Chinese companies in foreign markets, but many property companies are utilizing the opportunity to create a strong overseas financing platform," the newspaper said.

Some Chinese property companies are charting international plans, as they believe it will help improve their domestic image, says Frank Chen, executive director and head of commercial real estate services firm CBRE Research.

"Most of the companies going abroad are already well known and have the potential to grow further in the domestic market," Chen says.

Vanke, the largest listed real estate developer by market value in China, is an ideal example of this case. The company accounted for less than 2 percent of total residential property transactions in China.

Even though competition in the domestic market is fierce, there is still room for real estate companies like Vanke to further extend their business within China.

"Many Chinese companies also feel that by becoming a multinational corporation, they gain a positive impression with investors," Chen says.

Though several Chinese property companies have expressed a desire to go abroad, it is unlikely to become a major trend in the near future, says Zhang Dawei, head of market research at Centaline Group.

"Outbound expansion is largely driven by the interests of the company owners. I don't think many Chinese property companies will follow that line, as it would mean leaving the safe domestic markets for untested foreign markets, without local experience or knowledge," Zhang says.

Like Zhang, Liu from Colliers International also believes that the property market is a business that needs local experience and knowledge for investment success.

"In China, you build properties and sell them, over a short gestation period. But it takes time in advanced markets such as the US to get a payback. That's the cultural mindset Chinese developers must overcome when they go overseas," Liu says.

 

zhaoyanrong@chinadaily.com.cn