Foreign real estate firm sells stakes in China

Treasury Holdings Group, a leading real estate developer in Ireland, has sold its stake in two of its Chinese subsidiaries in a bid to avoid growing risks in China's real estate sector, China Times reported Thursday, citing industry sources with knowledge of the matter.

The report said that Treasury Holdings had sold the stakes in the two subsidiaries to one of the Irish company's senior executives, at a price of 2.23 million euros ($2.82 million).

The two subsidiaries had bought several properties in Shanghai between 2007 and 2011, but the report said that Treasury Holdings had been planning to sell the properties before it announced the sale of the two subsidiaries.

Recent media reports also said that US developer Tishman Speyer has been considering selling a piece of land in Shanghai that is worth 4.8 billion yuan ($756.75 million).

Even though the company denied the reports were true, the rumors have further shaken confidence in China's real estate sector.

"The foreign investors have sensed risks resulting from the government's policy toward the real estate sector, so some of them have chosen to withdraw," Yang Shaofeng, general manager of Beijing Lianda Sifang Real Estate Consultancy, told the Global Times.

Yang noted that foreign investors can get high returns if they choose to quit the domestic market now, as most of them entered China around 2004, when prices were one-third of the current level.

A report in Shanghai Securities News last week said that foreign investment in the real estate sector this year may amount to just 40 billion yuan, compared to around 80 billion yuan in 2011 and 2010.

But Yang noted that even if foreign companies all withdraw from China's real estate industry, the sector will not be affected that much, given that foreign investment accounts for a very small percentage of the total.

According to data from the National Bureau of Statistics, in the first seven months this year, investment in the sector reached 3.67 trillion yuan. This represents growth of 15.4 percent year-on-year, which is 1.2 percentage points lower than for the first six months.

"The government's tightening policies will surely affect investors' confidence, which may trigger developer's moves to balance their investment portfolio, but a massive withdrawal from China's real estate sector is not very likely," Liu Yuan, research director at the Shanghai branch of Centaline China Real Estate, told the Global Times.

"Tishman Speyer still has projects in Tianjin and Chengdu. It is an exaggeration to say that foreign capital is fleeing from China," noted Liu, who also said housing prices will remain stable and that the sector is unlikely to worsen.