Chinese builders look to foreign shores

The slowing development market in China could attract more construction firms to the UAE from the world's second biggest economy.

Chun Wo says that a difficult market in China is likely to prompt more Chinese developers to expand into the Middle East. China Daily via Reuters

The cooling property market in China is likely to attract more of its construction firms to the UAE.

Experts are warning that the appointment of the new Chinese premier Xi Jinping is unlikely to mean any significant loosening of the rules restricting property development in the country as China continues to focus on long-term economic reform.

During the past two years, China's government has implemented a series of strict measures aimed at curbing rocketing home prices that, in 2009, rose in the country's main cities by as much as 50 per cent. These include restricting mortgage finance and reducing developers' access to debt.

Since then, property brokers say prices have fallen by as much as 20 per cent. Construction has slowed significantly with builders decelerating construction to the lowest levels possible without setting off default clauses on their loans.

Speculation that a change in leadership could lead to a change of policy was played down by analysts.

"We are not certain that personalities will matter that much," said Société Générale's China analyst Wei Yao. She added that "phrases regarding party ideology and doctrines are largely unchanged [despite signs of] a better understanding of the pressing challenges at hand."

Chun Wo, a Hong Kong developer that has recently been concentrating its business in mainland cities such as Shijiazhuang, said the difficult market was likely to prompt more Chinese and Hong Kong developers to try their hand at expanding into the lucrative Middle East.

"It's a very policy driven market [in China]. The government is really clamping down on developers, making it very difficult for them to borrow money and for buyers to get mortgages," says Derrick Pang, the deputy chairman of Chun Wo. "Over the next few years I think we will be concentrating on Hong Kong and Abu Dhabi. "