China overtakes US in attracting most property investment

China overtook the US as the world’s biggest property investment market last year and will probably keep the lead in 2010 on economic growth and a lower reliance on debt, Cushman & Wakefield LLP said.

Real estate investment in China more than doubled to $156.2 billion last year, while the total for the US slumped 64 per cent to $38.3 billion, the New York-based broker said in a report on Wednesday. Excluding residential investments, the US came third after China and the UK.

“China will continue to see vibrant investment activity, despite recent government measures to cool down the property markets,” Donald Han, Cushman & Wakefield’s managing director for Asia-Pacific capital markets, said in the report.

China’s economy expanded at an annual rate of 10.7 per cent in the final quarter of last year, boosted by Premier Wen Jiabao’s $586 billion stimulus package. The US property market is being hurt by high levels of unpaid debt and a reluctance among banks to lend as they clean up their balance sheets, Cushman & Wakefield said.

China is taking steps to rein in the real estate market as price increases accelerate. The government in January re-imposed a sales tax on homes sold within five years of their purchase and the People’s Bank of China raised the proportion of deposits banks must set aside as reserves to reduce lending. Property prices in December rose at the fastest pace in 18 months.

Eight of the world’s 20 largest property markets last year were located in the Asia Pacific region, with Hong Kong, Taiwan and New Zealand registering gains in investment, according to the report. Cushman & Wakefield is the world’s largest closely held commercial real estate adviser.

Japan will see a revival after investment fell 48 per cent to $19 billion last year, it said. Some distressed properties are selling for less than their construction costs and average rental incomes tend to be higher than financing costs, making the market “compelling,” Han said.

US property investment will rise 50 per cent this year on falling prices and an increase in distress sales.