Institutional foreign capital has been investing in China real estate for more than 10 years and one of the perennial debates has been over city selection: First-tier versus second-tier, which is better?

It is possible to invest in, successfully exit and generate attractive returns from real estate projects in both first- and second-tier cities.

And while there are many benefits of investing in first-tier cities — such as liquidity, depth of market and greater transparency — over the years, first-tier cities have also become crowded with foreign and local investors bidding for similar projects. For investors who have the ability to source real estate opportunities directly in second-tier cities, the overall market dynamics are favourable compared with the average transaction in a first-tier city.

For instance, second-tier cities, such as provincial capitals and other large, fast-growing cities, offer the fo