By Patti Waldmeir in Shanghai and Simeon Kerr in Dubai
Published: January 18 2010 07:09 | Last updated: January 18 2010 07:09
Chinese investors, who have trawled the world for distressed car brands and cheap commodity assets since the beginning of the global financial crisis, will now take a shopping trip to Dubai to look for property bargains.
Investors from Wenzhou, known for their global bargain-hunting for distressed property assets, have been lured to Dubai by prices that look cheap by comparison with the rapidly rising Chinese property market.
A trip to the UK in the second half of the year may also be on the cards for the merchants of Wenzhou, famed as a city of millionaire entrepreneurs.
Zhou Dewen, head of the Wenzhou SME (small and medium-sized enterprises) Business Development and Promotion Association, says more than 20 Wenzhou companies, from real estate groups to investment firms and manufacturing companies, will visit Dubai towards the end of next month.
They have been attracted to the city-state by reports that property prices there have fallen further since the local debt crisis erupted in November, and signs that Dubai’s economy may have bottomed out and begun to recover.
Investors have been circling Dubai for months seeking distressed property sales – with some small deals completed. Real estate agents say property values are stabilising after falling as much as 50 per cent from their 2008 peaks.
But brokers in the emirate say many owners, including government-owned companies, have been reluctant to reduce prices in spite of mounting debt woes, a lack of bank funding and a poor outlook given an upcoming glut of supply and forecasts that any recovery from last year’s recession is likely to be moderate.
“There are many groups here but they generally can’t invest reasonable amounts of funds at reasonable prices,” says one agent representing foreign investors. “But eventually the realisation will have to come that they have to liquidate at prices the market can bear.”
Wenzhou entrepreneurs usually take two to three such shopping sprees to global real estate markets each year, says Mr Zhou, noting that investors from this eastern Chinese city visited France, Germany and the US last year, looking for property bargains from the financial crisis.
Wenzhou already has strong links with Dubai. Of about 150,000 Chinese citizens living in Dubai, nearly 20,000 are merchants from Wenzhou, Mr Zhou says. They run small businesses and have invested in real estate, including at least Rmb5bn ($732m) worth of properties hit hard by the debt crisis. These investments have so far produced losses of Rmb1bn, he says, but notes this is a small amount compared to what Wenzhou’s millionaires have earned there.
Compared to eastern China, Dubai properties are a steal. “In Wenzhou, residential properties are priced at Rmb60,000 per square metre, but a single square metre in [Burj Khalifa], the world’s tallest building, costs only Rmb70,000 at the moment. Why not buy them when they are still cheap?” Mr Zhou says.
An article posted on the Chinese Ministry of Commerce website says one Wenzhou entrepreneur, Hu Bin of Shanghai Zhongzhou International Group, invested $28m to buy an artificial island in Dubai in 2007, but construction on the island has been suspended due to the global financial crisis.
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China is expending its country area in some new ways.
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