BEIJING, July 20 (Xinhua) -- Foreign investors acquired 4.5 billion U.S. dollars worth of property in China in the first quarter, a surge of 32 percent over the figure for entire 2005, international property adviser Debenham Tie Leung (DTZ) said here Thursday.

    Nicholas Cho, director of DTZ investment department, told Xinhua that the impressive growth is partly due to the fact that there was a huge increase in foreign investors in the country's property market in 2005.

    As major transactions take quite a long time, many of them were only inked in the first quarter of this year, said Cho.

    According to figures released by Chinese authorities, foreigners acquired 3.4 billion U.S. dollars worth of property in China in 2005. They also invested 5.4 billion dollars in the property development sector.

    It is generally believed that the real amount of overseas funds entering the property market is much larger, since not all funds are reflected by the current foreign exchange monitoring system.

    A DTZ report released Thursday said that 93 percent of foreign investment in China's property market took place in Beijing and Shanghai, and that most of the investment came from the United States, Singapore and Australia.

    The report reveals that office and retail property received 88 percent of foreign investment.

    Foreign investment in residential property, which has given rise to most public concern amid soaring housing prices, only accounted for 7 percent.

    The report says China's new policy restricting foreign investment in the property market will slow the flow of foreign capital into the sector, with prospective investors choosing to stay away for now.

    Rather than buying property in the market directly, more foreign investors may choose to partner up with Chinese property developers and take part in project development, the report says.

    Rocketing housing prices in major Chinese cities and reports of big deal foreign acquisitions have recently caused a public outcry about potential foreign involvement in fuelling the property bubble in China.

    Yi Xianrong, a financial scholar with the Chinese Academy of Social Sciences, was reported as saying that speculation by foreign capital has become a major threat to China's property market.

    The new policy issued by the Ministry of Construction and other authorities says only foreign entities with a physical presence in China and foreigners working or studying in China for over a year could buy property for self-use.

    The DTZ report says foreign investors in China's property market fall into two types. One type is mutual funds, which usually buy property directly from the market. The other type of investors usually develop their own property and manage them by themselves.

    Nicholas Cho denied that foreign money is involved in speculation in the property market, saying that most investors are drawn here by China's economic potential, and hence tend to retain their property for long-term returns. Enditem