BEIJING, June 2 -- Overseas institutional investors have purchased a large number of property projects in Shanghai, Beijing and Guangzhou this year, which has contributed to the soaring housing prices, Oriental Morning Post said today, citing Xinhua news agency.

    Though many of the foreign investors announced that they plan to run long-term investments in China, their former performances show they never hold a property more than five years, the newspaper said. Their massive short-term investments may cause a property bubble, the newspaper said.

    Since 2004, foreign investment banks have accomplished a series of takeovers in larger cities. Morgan Stanley, a powerful investment bank and retail broker, achieved success by buying high-rise service apartments and luxury flats in the downtown area and in areas like Lujiazui, the central business district of Shanghai.

    Other foreign investors also spent large sums of money on properties in Shanghai. A real estate fund with US and Indonesian backers bought a high-rise service apartment near Xintiandi, while Cargill Inc bought 24 villas in Nanhui District. Goldman Saches spent 70 million yuan (US$8.75 million) for a service apartment in the Hongqiao Area.

    We believe that foreign investors will purchase at least 10 major property projects within this year, said He Maike, head of the research department of China, Jones Lang Lasalle surveyors Co. Ltd. More overseas funds will be invested in Shanghai, Guangzhou and Beijing in the near future, he added.

    Foreign investors may also expand to some medium-sized cities, said Li Xu, a director of Savills.

    If a foreign investor buys an office building, they typically hope to cash in by selling it off immediately, said Andy Xie, the chief economist of Morgan Stanley, Asia. Governments should pay more attention to those foreign institutional investors' lobbying for REITs to cash in on overseas securities markets, he said.

    The domestic economy will face risks in cases where foreign investors cash in and withdraw their money from China, said Zuo Xiaolei, the chief economist of Galaxy Securities. These types of short term investments that flood China's property market should be considered "hot money," she said.

    The central government has launched six new measures to guide the development of China's property market, including the construction of more budget apartments to balance the domestic market.

    The government plans to use tax measures to "correct" distortions in the property market and it will boost supervision to restrict the amount of land being used to develop expensive housing, the CCTV reported on May. 18. The government will also make it easier for people to take out loans for low-cost housing, according to the broadcaster. China's property market needs "more order," CCTV said.

    (Source: Shanghai Daily)