KEY POINTS:
While New Zealand's Reserve Bank wrestles with the problem of controlling the rampant property market, China's Government has a similar headache but on a far larger scale.
China's surging economy has helped push property prices to the point where home ownership is slipping out of reach of many
people.
But rising prices have also meant hefty returns for investors including big foreign institutional investors such as ING, Calpers, Morgan Stanley, JPMorgan, Macquarie Bank and the Carlyle Group, which have turned to China as returns from their home markets have waned after years of rapid gains.
Stories of fortunes made on China's property market have lured smaller scale foreign investors such as Aucklander Todd Subritsky who runs a property development start-up called the Sino-NZ Investment Group in northwest China.
While China's economy grew 10 per cent in 2006 and a similar performance is expected this year, average property prices in key cities have risen at roughly twice that rate.
Breathtaking industrial growth is hungrily sucking workers from rural areas into east coast manufacturing centres such as Shenzhen, in Guangdong, south China, a short train journey from Hong Kong.
The early leader of China's economic reforms, Deng Xiaoping, decided in the 1980s that the area would be the focus of a new drive towards manufacturing and trade with the west, Shenzhen's growth has been little short of convulsive.
It has gone from literally a village of a few hundred souls to a smog-shrouded city of 8 million in little more than quarter of a century. In China, when something is done very quickly, it happens at "Shenzhen speed".
While perhaps the majority of the city's inhabitants earn very little by Western standards, working the prodigiously productive factories that have earned Guandong its reputation as "the workshop of the world", there is clearly a lot of money in the town.
An apartment in one of the enormous thickets of high rise complexes that march across Shenzhen's cityscape is not cheap.
The average price is RMB20,000 ($3500) per square metre, against the average in Guandong of RMB8000 per sq m and prices have risen by 20 per cent in the last year, fuelled in part by demand from Hong Kong residents looking for a more affordable home than they can find in their own city.
It's a similar story in other main cities including Shanghai and Beijing, where the average price is around RMB30,000 per sq m. But returns for investors have begun to ease there because of the amount of money chasing limited opportunities, and tighter regulations.
While foreign investors may have been heartened by the recent introduction of new laws which strengthen property rights, this week, China's State Administration of Foreign Exchange toughened rules for overseas developers in order to curb property speculation.
But Subritsky, a 35-year-old who has lived in China for 4 1/2 years, still sees plenty of opportunities further west. His company was set up to invest in projects in some of China's inland cities, including Xi'an in Northwest China, the location of the famed terracotta warriors, and Subritsky's home for the past year.
Having seen friends double or triple their money through property investments in Beijing where he worked as an English teacher for 3 1/2 years, he is hoping to repeat their success further west.
Subritsky says while there are signs of the residential market slowly picking up in Xi'an and other cities in the area, "the word is the commercial property sector is where there's going to be some big gains, largely because the government is still trying its best to attract foreign investment to all of these different areas".
He and his partners invested in two properties - a mix of residential and commercial, a model favoured and encouraged by local government. Those have increased in value by 30 per cent in less than a year he says.
Encouraged by that, he's set up Sino-NZ Investment to help others into the market in Xi'an and other nearby cities. His clients are mostly from the US and Australia with some from New Zealand.
Despite the rapid gains he's seen, he says investors need to be patient.
"There's certainly a minefield of complexity you have to negotiate through, but in saying that, there's also loopholes all over the place, which you can use to bypass much of the regulation and you get into it as a Chinese national would."
The success of Subritsky's venture rests, like those of his larger institutional investor counterparts, on local knowledge and expertise.
"We're fortunate enough to have decent connections over here that we can just follow the line of Chinese nationals and doing so we cut out 90 per cent of the red tape and it's still 100 per cent legal.
"We're pretty excited, we feel we're making steps forward every day."
* Adam Bennett travelled to Guangdong as a guest of Guangdong Overseas Chinese Affairs Office, Cathay Pacific, and The New Zealand Chinese Herald.
Sino-NZ
* China property start-up run by Aucklander Todd Subritsky.
* Has invested in mixed commercial and residential properties.
* Assets have increased in value by 30 per cent within a year.
* Subritsky says investors need patience and recommends a minimum investment period of five years.
